Emotional Investor - I'm a mess and need help!

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White Coat Investor
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Re: Emotional Investor - I'm a mess and need help!

Post by White Coat Investor » Sun Sep 23, 2018 9:22 pm

sruliz wrote:
Sun Sep 23, 2018 12:22 pm
Hello everyone. This email is long overdue from me and I finally found the guts and time to write it. I appreciate this forum and all those who spend precious time helping others with investment advice. Here's my story:

I am a 40-year old physician relatively well to do with about 300k to invest a year. I've known investing since I'm a kid but I have learned that I am an emotional and reactive investor. I get impatient with my investments and after setting a financial plan tend to mess things up 6-12 months in. This has been a repetitive cycle for me for the past 20 years and I'm sick of it. I've had accounts with Fidelity, Vanguard, Betterment, Merrill Lynch, Bernstein (cash balance/defined benefit retirement account) and at Empower Retirement (401k.) My wife has her small 401k at MassMutual. I've played with stocks/triple leveraged ETF's (gambling), and options. I sell too fast and buy instinctively and I know that if I don't change my pattern soon I will end up with zero to show for all my investment efforts. I simply don't trust myself anymore to handle my finances. Ouch!

Just to explain my financial a bit better:
1) I currently have about $450k in Merrill Lynch invested with my brother who is a financial advisor. It is in a mix of stocks/bonds and alternative investments backed by ML. I see an active churn on the account and the fees come to about 1% a year. It is doing decently well.
2) Another 450k at TD Ameritrade with a different financial advisor who charges 0.8% a year. He has this money invested in a strategic basket of ETF's/mutual funds in an 80/20 basket with about 25 holdings. Well diversified aiming to earn about 5-6% year long-term. I didn't want all my money with my brother because as much as he is a financial advisor we are family and I didn't think it smart to have most of my money with him.
3) 150k in an AB Bernstein account which is a defined benefit plan from my business and managed by a friend there. It returned 0% in the past year and is in two Bernstein mutual funds (60% AWAYX/40% SNIDX). This is a company account so not sure I could do much here. The advisor has not looked at the account in a year and its been bothering me. We have an appointment next month to discuss options and he's likely to recommend a customized portfolio. I plan on adding about 100k per year to this account.
4) I tried Betterment to see if I would enjoy the robo-investing experience and currently have 35k in an account there set at 90S/10B. It is automatic and gives me some tax loss harvesting. I don't like this experience since it totally removes me from any decision making. I want to feel more involved.
5) 55k in Empower Retirement (company 401k) which is invested in different Bernstein target retirement mutual funds in a 90S/10B ratio.
6) Invested 125k in a nursing home with a friend last year - no return yet
7) Invested 15k in a food truck with a friend last year- 10% return so far
8) Invested 300k in my own medical app and have not seen a return yet

Because of my propensity to not be able to sit still with my investments I have tinkered with Robert Lichello's AIM method (a market timing system which tries to buy low and sell high) and Jason Kelly's 3Sig/6Sig (jasonkelly.com) which is similar but different in nature. I am tortured by my inability to pick one system and stick with it. The automatic systems (AIM/3Sig) appealed to me because it removes any form of emotion out of investing and gives you clear guidelines when to buy or sell. Yet, they are not proven and potentially dangerous and my gut tells me to stay away if I want long term stress free growth.

I want to build significant wealth for my family and be able to live a comfortable financial stress-free!!! life yet still feel actively involved in my investments and thats probably why the Betterment investment bothers me so much. I can't see myself investing in a 3 mutual fund portfolio either. I need help and I know its confusing but there must be a solution out there for a guy like me. It's hard for me to consolidate all my accounts in one place and I am sure this is adding to my angst.

I'd appreciate any thoughts you guys have for me.
I got a PM asking me to help you if I could.

I rarely say this, but I think you could use a good advisor (not a family member) who offers good advice at a fair price and will help protect you from your own tendencies.

You're collecting investments, not investing. You need a written financial plan you can follow to meet your financial goals, and then you need to follow it and not be distracted by apps and food trucks and nursing homes and hot stocks and hedge funds and cryptocurrency and everything else that has or will come along.

At $300K a year, you should be financially independent within a decade with a simple old boring investment plan. Between your practice and hobbies I bet you have enough to keep you occupied without having to mess with your money for entertainment.

Let me know if there is anything else I can do to help.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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CyclingDuo
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Re: Emotional Investor - I'm a mess and need help!

Post by CyclingDuo » Sun Sep 23, 2018 9:56 pm

sruliz wrote:
Sun Sep 23, 2018 12:22 pm
Hello everyone. This email is long overdue from me and I finally found the guts and time to write it. I appreciate this forum and all those who spend precious time helping others with investment advice. Here's my story:

I am a 40-year old physician relatively well to do with about 300k to invest a year.
With $300K to invest each year, you've already won the lottery in life in terms of income. At that rate of income to invest, you don't even need to invest, gamble, or spend any more time goofing around. Just sock the $300K away in cash/money market savings and after another 15 years you've got an additional $4.5M, or after another 20 years $6M. That alone should pay for plenty of food/transportation/housing in retirement. Yes, if that $300K per year were well invested you could do much better that that and become quite the philanthropist, but not until you get out of the way of yourself.

You are what shows up in this chart as the "average investor" because you can't get out of the way of yourself:

Image

You could seek treatment for gambling.

You could put your spouse or significant other in charge of your investments because you are terrible at it. Nothing wrong with that. Just admit it and move along.

You could put 1/3rd in each of the following three: Total Stock Market, Total International, and Total Bond and call it a day. Yup. It would be that easy if you would/could allow yourself.

There a lot of things you could do, but the number one thing you need to do is focus on your medical practice and bringing in that income. That is your speciality and you should focus on what you can do well.

It is clear the investing side is not your gig or doesn't jive well at all with your behavioral patterns. So you need to remove yourself from that if you don't seek professional help.

But if you insist on tackling your inner demons to turn it all around: Read Jason Zweig books...

https://www.amazon.com/Jason-Zweig/e/B001H6MXVU

Read Jack Bogle books...

https://www.amazon.com/s/ref=nb_sb_noss ... John+bogle

Read Bill Bernstein's simple primer...

https://www.etf.com/docs/IfYouCan.pdf

You cannot beat the market. Period. Either give in and keep it simple, or just move along and put your $300K per year in the bank.
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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Taylor Larimore
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Two suggestions

Post by Taylor Larimore » Sun Sep 23, 2018 10:19 pm

sruliz:

The suggestion to use low-cost Vanguard Personal Advisor Service free of conflict-of-interest was a good one.

It may help to read my "Simplicity" link below.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Emotional Investor - I'm a mess and need help!

Post by dratkinson » Sun Sep 23, 2018 10:37 pm

BH Emotional Investor - I'm a mess and need help!


The good plan.
sruliz wrote:
Sun Sep 23, 2018 5:18 pm
...my personality of aiming for perfection...
The enemy of a good plan is the dream of a perfect plan. --Prussian General Karl von Clausewitz

Market investing for retirement is about the good plan---investing in the average. Why?

There are ~6K stocks in the total stock market index fund. There are ~3K stocks in the total international stock market index fund. There are ~9K bonds in the total bond market index fund. An age-appropriate portfolio invested in those three funds* owns ~18K individual investments and should return ~7%/yr.

Rhetorical question. Which combination of those 18K individual investments will return more than 7%/yr? If you can't answer this question---can't create the perfect plan---then you can't pick individual investments.

* An all-in-one fund mixes the three funds for us into an age-appropriate mix. Meaning we only need to invest in one fund. It doesn't get simpler than that.



Four stock market lessons. Sixty+ years of academic research into investing teach four major stock market lessons; ignore them at your peril:
--It’s very easy to get the market return, just buy index funds.
--It’s so impossible difficult to get more than the market return, that it's not worth trying.
--The short-term market return is mostly noise, so should be ignored.
--If you must reach for yield, can have a 5% (of total investments) play money account to scratch that itch. Quit playing when lost.



Suggested reading.

--May want to read a few recommended books on behavioral finance/investing. We’re prone to many errors.
See: https://www.bogleheads.org/wiki/Books:_ ... nd_reviews

--May want to read some of the books by William Bernstein. He started life as a doctor.
See: https://en.wikipedia.org/wiki/William_J._Bernstein

--Ditto the recommendation to read the White Coat Investor website.
See "Stupid Doctor Tricks": https://www.whitecoatinvestor.com/stupi ... -mistakes/



You have a great potential to create retirement wealth, yet have demonstrated little ability to do so. This means you are the problem. To solve your problem, you must change your ways, ...or take yourself out of the loop.

Example. Assume you start today from zero (nothing saved for retirement)...

--You are 40 years old and can save $300K/yr for retirement. If you work until age 65, then you would have >$7.5M (=300K x 25) for retirement if you did nothing but buy CDs.

--If we assume the market returns 7%/yr long-term, then $300K/yr invested for the same 25yrs would be >$18M (= N=25, I=7%, PV=0, PMT=-$300K, FV=>$18M, mode/type=0).

Instead, you allow a relative to actively churning an account---adding an additional 1% expense on top of his existing fee(s)---and you think he's making money for you. No. He's not. He's making money for himself.



The short answer. Don't go into business with family or friends. Don't loan money to family or friends. (You can give money, but you can't loan money.)

Your expertise/passion is in being a good doctor. Not in owning nursing homes or food trucks with friends.

The business loans you've made may eventually become losses you can write off on your taxes. (You could use the deductions, right?)

Option. You may be able to sell your shares to others with a greater passion for operating them. Or to a "greater fool".

Consider these loans to be your 5% play money account. Don't add more to it. If the day comes when you must choose between putting up more or losing your initial investment, take the loss and move on. The loss of your initial investment may be the cheaper option in the long run. (Been there, done that.)



You want a comfortable retirement for your family. You can have that.

You feel you are behind in saving for retirement and want to "catch up". There is no "catching up".

The best you can do is to start from where you are and move forward.

But to make steady progress forward requires that you remove the problem. And since you are the problem---and may be unable to change---this means you need someone to tell you… "Do nothing, just buy and hold total market index funds for the long-term." Why? Long-term the market should return 7%/yr. And that's better than you are currently earning.

(1) Echoing SoAnyway, if your wife is more comfortable managing your (plural) retirement investing, then allow her to do so. But if you would badger her about the latest "hot" stock or IPO tip, then don't use her---to save her from this abuse.

(2) Vanguard has a PAS (personal advisory service) that will do this. I recall the fee was .3%/yr. (They will not churn your account.)

(3) The forum also has two respected authors who are in the business of managing personal investments. (But this service is only for those who prove themselves incapable of learning to do this for themselves.)

Moving forward, your only allowed monthly activity is to add new money to your established total-market investments. You are not allowed to change/churn those investments.



You can have a comfortable retirement. All you have to do is get out of your way.
Last edited by dratkinson on Sun Sep 23, 2018 10:56 pm, edited 1 time in total.
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

JBTX
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Re: Emotional Investor - I'm a mess and need help!

Post by JBTX » Sun Sep 23, 2018 10:55 pm

I don't like this experience since it totally removes me from any decision making. I want to feel more involved.
yet still feel actively involved in my investments ......., I can't see myself investing in a 3 mutual fund portfolio either.




Until you deal with this it won't get better.

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Re: Emotional Investor - I'm a mess and need help!

Post by aristotelian » Sun Sep 23, 2018 11:16 pm

OP, have you seen the Seinfeld episode where George decides to do the exact opposite of his every instinct? That is what you need to do with your portfolio.

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Re: Emotional Investor - I'm a mess and need help!

Post by FGal » Sun Sep 23, 2018 11:28 pm

If you want fun and excitement, take up skiing, scuba diving or hang gliding. Hell, even stamp collecting or dog training just go find something else to keep you busy in your free time so you stop losing your money.

Investing should be boring and you shouldn't even be thinking about it but once or twice a year to see if you need to rebalance.

You are your own worst enemy by feeling the need to control things. You are not a good stock picker, and should stop. But that's okay, most of us aren't good at it either. We just have better sense than to persist in trying (and losing).

Stop gambling with your investments and set up a simple lazy index fund portfolio and go find a real hobby or two that isn't going to cost you millions over the course of your lifetime.

And I would NEVER use a family member to manage my accounts if they charged and churned them. That is bullpucky, and you should get away ASAP and dump everything into Vanguard and then leave it alone.

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Re: Emotional Investor - I'm a mess and need help!

Post by Finridge » Mon Sep 24, 2018 3:01 am

camillus wrote:
Sun Sep 23, 2018 12:56 pm
Stated goal: Find a way to be more involved in investing.

Problem: You are a horrible investor. Sorry.

Solution: Change the goal so that you are involved as little as possible with your investing.
Very elegantly stated.

I've heard of people setting up trusts for their children to protect them from themselves. This may be a case where the OP should look into the feasibility of setting of doing this for himself-putting funds into an irrevocable trust that is controlled by someone he trusts, and with the trust instructions providing for the funds to be invested in a three-fund portfolio.

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Re: Emotional Investor - I'm a mess and need help!

Post by Finridge » Mon Sep 24, 2018 3:06 am

JBTX wrote:
Sun Sep 23, 2018 10:55 pm
I don't like this experience since it totally removes me from any decision making. I want to feel more involved.
yet still feel actively involved in my investments ......., I can't see myself investing in a 3 mutual fund portfolio either.




Until you deal with this it won't get better.
My thoughts exactly. Sruiz, you said you are a physician. Imagine that you are treating a patient who is an alcoholic. He has liver cirrhosis and other serious health issues caused by drinking, and yet he keeps drinking. He is asking you for help. You tell him that he needs to stop drinking, and he says won't do that...

The problem here is not that there is not a solution to your issues. The problem is that you are not accepting the solution.

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Re: Emotional Investor - I'm a mess and need help!

Post by randomizer » Mon Sep 24, 2018 3:34 am

A leopard cannot change its spots. Good luck trying though.

Having said that, increase savings rate if you want to optimize, but leave investments simple (three-fund portfolio, or maybe even one-fund).
87.5:12.5, EM tilt — HODL the course!

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Re: Emotional Investor - I'm a mess and need help!

Post by celia » Mon Sep 24, 2018 3:51 am

I'm reading this thread from the perspective of a spouse.

What will your wife do if you die tomorrow? The odds are that she will outlive you and you are making a mess for her to clean up!

Does she even know all the places where you have "invested" money? (You never even mentioned retirement accounts or accounts in her name.)
Does she have separate accounts?
Who pays the bills?
Do you have an estate plan in place?

Since you think you have an investing problem, it is time to have your wife read this thread. Then discuss everything with her. LISTEN to her questions and write them down. Then ask HER OPINION of what she thinks the two of you should do about this. (She knows you better than we do.) Your actions/re-actions are impacting your joint (and possibly her future) welfare.

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Re: Emotional Investor - I'm a mess and need help!

Post by livesoft » Mon Sep 24, 2018 4:54 am

FGal wrote:
Sun Sep 23, 2018 11:28 pm
And I would NEVER use a family member to manage my accounts if they charged and churned them. That is bullpucky, and you should get away ASAP and dump everything into Vanguard and then leave it alone.
I wonder if the OP should manage his brother's investments. It would be interesting to know more about the portfolio and churn that is worked on by the brother.

My brother and I are very similar.
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Re: Emotional Investor - I'm a mess and need help!

Post by goblue100 » Mon Sep 24, 2018 7:36 am

From your OP, it sounds like you want to "beat" something, either the market or other investors. My results improved a ton once I decided that:

1. I'm not a trader scalping eighths and quarter points from small market moves, I'm a long term investor.
2. There is no way to miss market declines. If you want the positives, embrace the negative.
3. Set a reasonable asset allocation, and take what it gives you.
4. People that claim to do better than me often end up doing much worse over the long run.

It's funny you mention the Lichello AIM method. That was actually one of the first books I ever read about investing. How to Make $1, 000, 000 in the Stock Market Automatically: Written in 1977, I probably read it in 1981 or 1982. I was captivated by the title and extremely disappointed when it didn't reveal a quick way to get to that million dollars!
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns

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Re: Emotional Investor - I'm a mess and need help!

Post by dratkinson » Mon Sep 24, 2018 7:52 am

BH Emotional Investor - I'm a mess and need help!
sruliz wrote:
Sun Sep 23, 2018 12:22 pm
...I get impatient with my investments and after setting a financial plan tend to mess things up 6-12 months in. ... I sell too fast and buy instinctively and I know that if I don't change my pattern soon I will end up with zero to show for all my investment efforts. I simply don't trust myself anymore to handle my finances. Ouch!

...[relative managing some money and} I see an active churn on the account and the fees come to about 1% a year.

... tried ... robo-investing experience ... I don't like this experience since it totally removes me from any decision making. I want to feel more involved.

... Invested 125k in a nursing home with a friend last year - no return yet

... Invested 15k in a food truck with a friend last year- 10% return so far

...Because of my propensity to not be able to sit still with my investments I have tinkered with ... tortured by my inability to pick one system and stick with it.

... The automatic systems ... appealed to me because it removes any form of emotion out of investing and gives you clear guidelines when to buy or sell.

... I want to build significant wealth for my family ... yet still feel actively involved in my investments...

... I can't see myself investing in a 3 mutual fund portfolio either. I need help and I know its confusing but there must be a solution out there for a guy like me. It's hard for me to consolidate all my accounts in one place and I am sure this is adding to my angst.

Behavioral errors.

Might want to see how many behavioral investing errors you can identify. See "The Big List of Behavioral Biases": http://www.psyfitec.com/p/the-big-list- ... iases.html

Since above linked list is a little cryptic, you will have an easier time if you read some of the recommended books on behavioral finance/investing. They go into more detail so are easier to digest.

After reading the first book, I was surprised to learn I’d been making so many behavioral investing errors. What to do?

Once we identify our personal behavioral errors, we can arrange our lives to try to avoid them in future.

Example. I know I must eat something before I go grocery shopping, to avoid the error of buying snacks. (Mmmmm donuts.)

The same is true for our investing lives. We can arrange our investments to avoid errors.



The economy and stock market. (This is from my memory of reading some of the recommended books and forum discussions: basic investing how-to, history of academic research into investing success, retirement planning,.... Since my memory is faulty, it’s your due diligence responsibility to read the books for yourself.)

The economy (businesses) and the stock market are two different animals. How so?

Businesses (the economy) depend upon stability* to make a profit. If businesses struggle to right-size but can make a profit, then the stock market will be encouraged and rise. In this the stock market is forward-looking and generally expects better times.

* This means it does not matter which political party is in office. Why? Because businesses will adapt to whatever brand of market stability is imposes.


Question. Where do businesses, public and private, get money?
Answer. From people. As both a source of capital and revenue.



Public equity.

As long as people need goods and services, and businesses providing those goods and services get financing (capital by issuance of stocks/bonds) from the public sector, then investors in those businesses should earn 2-2.5%/yr in stock dividends from business operations.

As long as the population continues to grow (~5%/yr assumed), then businesses (the economy) should grow ~5%/yr to fill the growing demand for additional goods and services.

This means stock prices (stock market) should grow ~7%/yr (= 2% from current operations + 5% from annual business growth). (I recall some forum topics have cautioned that the market may only grow 6%/yr going forward.)

Every year, a varying list of <20%** of businesses return (stock price appreciation) more than the market return after accounting for the transaction costs (research, brokerage, taxes,...) to buy them*. This means a varying list of >80% of businesses return less than the market return. So just from the averages, if you pick individual stocks (or your relative/friend picks/churns them for you), you will own more losers against the market return, than winners. Is this really the type of hands-on, active-involvement you want/need in your life? If not, then don’t seek it by trying to pick individual stocks.

* That’s the good news. The bad news is that it’s very difficult to identify them before the stock price rise. And if you buy after a temporary stock price rise, then you’ve set yourself up to “buy high, sell low” when the business again joins the list of the >80% that lose against the market return.

** The 90% solution. If you invest in the market return for >10 years, you will outperform the result of >90% of active managers (stock pickers). Why? While <20% of businesses outperform annually against the market return after accounting for transaction costs, for investors who use an active financial advisor, only <10% of businesses outperform after active management subtracts its additional layer of costs (AUM fee, short-term capital gains tax from churning,...).

Bottom line.

--If you use an active financial advisor (or try to pick your own stocks), every year he must produce 4-5% more than the market return, to breakeven with the market return after subtracting all costs associated with active management. This is a very high hurdle to overcome and gives the investing edge to passive investors in index funds who simply accept the market return.

--The market return is not average. Why? It’s higher than the return of the average active investor after accounting for all costs. See “The Arithmetic of Active Management” article by William Sharpe, Nobel Laureate in economics: https://web.stanford.edu/~wfsharpe/art/ ... active.htm .

--If you invest in the market return, long-term your investments should grow ~6-7%/yr* and you will outperform >90% of active managers. To get the market return, invest in market index funds. (* Depends upon whom you read. And your asset allocation---stock/bond ratio.)

--Cost (loads, fees, taxes,...) is the only investing variable you can control. All else being equal between two investments, choose the lowest cost investment.

--To maximize your retirement investing return, accept the market return and minimize your total cost.



Private equity.

You have fewer safeguards with private equity investments. Why? Less government oversight. (And intervention. Your nursing home and food truck businesses are probably too small to get a government bailout if they get into trouble.)

Plus private equity investors have the added hassle of dealing with family and friends.


On the other hand, when GM went bankrupt, investors in S&P500 index funds (Vanguard’s, Fidelity’s,…) were not hassled when GM was removed from the index, and fund managers were forced to sell GM. Nor where they hassled when GM came out of bankruptcy, was again added to the S&P500 index, and fund managers were forced to buy GM. In both cases, GM represented an investment of <5% of the index/fund---no great worry for index investors. So for public equity investors in S&P500 index funds, GM’s bankruptcy was a non-event because fund managers (and a government bail out) took care of them.

For total market investors, when GM fell off the S&P500 index, it was still on the total US stock market indexes (Wilshire 5000 index,...), so never needed to be sold or re-bought by index fund managers.

Tax reporting. For S&P500 index funds, the forced selling/buying of GM increased costs slightly---higher costs hurt investor return. But total US stock market index funds were not forced to sell/buy GM so costs didn’t increased---lower costs benefit investor return. In both cases, the fund’s annual 1099DIV---a one-line tax-software entry---told investors all they needed for tax reporting. Easy peasy.


In good times, your private equity investments will not be as simple as index investing. In bad times, they will become a major event for you. Do you really want the family/friends drama, or to be required to step in and bailout/manage either/both to prevent, or go through a bankruptcy? Is this really the type of hands-on, active-involvement you want/need in your life? If not, then don’t seek it by investing in private equities, or with family/friends.


Bottom line. Life is much simpler for investors in public-equity broad-market index funds. The anxiety level is so low that forum members brag they know their investments are right (for them) because they can pass the SWAN test. (Sleep well at night.)



Wise retirement investing.

All that is required to invest wisely for retirement is to do a few things right, and avoid serious mistakes.

You know the old joke?
Patient: Doc, it hurts when I do this.
Doc: Don't do that.

In this case, don’t do what you’ve been doing. Why? You’ve (also) proven it doesn’t work.

Instead, set up your investments for simplicity and to avoid behavioral errors.
--Accept the market return, and wait for time and compound interest to work its magic.
--To get the market return, invest in broad market index funds at the lowest cost.
--Every month, add new money to your retirement investments.
--Rebalance your investments as necessary to maintain your chosen asset allocation.
--Don’t sell your investments until you withdraw money in retirement.

If you can't do this for yourself, then pay someone to do it for you.



P.S.

If you flip a coin. Over the long-term you expect to get 50/50 heads/tails. But you have zero control and can never predict the ordering of heads/tails. In coin flipping, the only smart bet is on the long-term average.

If you invest in the markets. There are ~6,000 companies in the total US stock market index, ~3,000 companies in the total international stock market index, and ~9,000 issues in the total US bond market index. Your odds of picking a winning combination against the market return are much worse than your odds of calling “heads or tails”. In investing, the only smart bet is on the long-term market return.

If you invest in the long-term market return, you are guaranteed to get it. Less your costs, which you will minimize. But you have zero control and can never predict the ordering of returns by year.

A forum member likens investing to the situation where a baseball team sets up against an unknown opponent. The best you can do is to spread your defenses and wait for the ball to come to you.


Disclosure. In my 30s, I tried individual stock investing and quickly lost everything. I was lucky. Why? I didn’t have more money to invest so quickly learned the lesson---stock picking is the losing bet.

On the other hand, you’ve been unlucky. Why? Even though you’ve lost money trying to pick stocks against the market return, you’ve always had enough money to refill your brokerage account. So you never saw a zero balance. Or learned this lesson.


Disclosure. Periodically the forum members go through spells of discussing our plans to simplify our investments and financial lives prior to the onset of old-age cognitive decline. So our heirs, or we can continue to manage them. (And other estate planning issues.)

I went through the drill in 2015 and began consolidating and closing accounts. I’m now down to two fund families, one online bank, and one local B&M credit union. Life is much simpler with fewer accounts. (I could consolidate more, but having a small backup capability is a better plan.)


If you don’t simplify your investments, it will be a mess for your heirs*. If your investments---you’re the only one who knows why you have them---are causing you anxiety, then the anxiety for your heirs will be greater. (* Your wife may only get pennies-on-the-dollar to unravel your private equity investments.)

“Our life is frittered away by detail. Simplify, simplify, simplify! I say, let your affairs be as two or three, and not a hundred or a thousand; instead of a million count half a dozen, and keep your accounts on your thumb-nail.” --Henry David Thoreau

“God grant me the serenity to accept the things I cannot change; courage to change the things I can; and wisdom to know the difference.” --Serenity Prayer

Simplify your investments. Accept the market return as the only guaranteed investment. Your investment anxiety will go away when you stop trying to control that which can’t be controlled. And your heirs will appreciate the simplicity and transparency.





Edit. Final thoughts. Maybe.
Last edited by dratkinson on Sun Sep 30, 2018 10:56 pm, edited 18 times in total.
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

bgf
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Re: Emotional Investor - I'm a mess and need help!

Post by bgf » Mon Sep 24, 2018 7:55 am

your challenge is not to find "the best" investments but to exercise self discipline in investing the way others above have advised. you are clearly capable of self discipline, planning, and working towards long term goals - this is apparent simply from your income and occupation. you need to turn that self discipline towards your investment plan. you know its the problem as you've repeatedly stated that you have a problem not being involved and making decision after decision. work on that.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

Allixi
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Re: Emotional Investor - I'm a mess and need help!

Post by Allixi » Mon Sep 24, 2018 8:33 am

Let's have some perspective here. OP has just over a million dollars, not including whatever equity he has in real estate, at age 40, despite all the mistakes he's made so far. He's doing something right.

The problem here, OP, is that you're not "investing", at least not in the Boglehead sense of the word. You're playing with your money. And that's fine with a small portion of your portfolio, less so when it's your entire portfolio. You probably won't be happy if you aren't constantly tinkering with some part of your investments, the trick if to limit that to maybe 10 or 20%, if you can.

Some have suggested that you might have some OCD-like elements and brought up the "doctor it hurts when I do this" joke. I won't conjecture about your mental health, but if I may theorize about your specialty to come up with an analogy that might resonate with you:

Your high salary suggests to me that you're in a procedure or surgery-based specialty. If so you must be very good at it. You must have also heard the saying that "it takes a month to learn how to do a technique, a year to learn when to do it, and 10 years or more to learn when not to do it". You understand that any procedure carries risks of complications during and after - bleeding, infections, scarring/adhesions, damage to surrounding structures, etc. Surely you've recommended against certain treatments and turned down certain procedures (if I am correct - apologies if you're in ID or pathology or something)

Investing is kind of the same way. When you do too much, there are transaction costs, opportunity costs, taking on additional risk, etc.

Seems like it's time for you to learn how NOT to do things to your investments.

rbaldini
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Re: Emotional Investor - I'm a mess and need help!

Post by rbaldini » Mon Sep 24, 2018 8:35 am

OP, I think it’s important to ask how you will deal with future down times.

Suppose, like a good little Boglehead, you totally clean up and put all your money into some 3 fund portfolio. You are proud of yourself for doing this, and you are able to stay passive. But then, the market dips. You tell yourself that dips are just part of investing, so you stay the course. But it keeps dipping. Soon the media declares we are in a recession - it’s all anyone can talk about, which makes it hard not to look at your investments more often. Prices flatten out a bit for a few weeks, which causes a few pundits to say that things are safe - but then it drops 8% in just two days. After a year, your new boglehead-approved investment plan is down 25%. Meanwhile, your surgeon friend broke even because he “knew” a recession was “obviously” going to happen. All your buddies agree that he is the smartest of the bunch. And they don’t say it, but a lot of them think you’re a sucker for holding onto the market during a recession. Meanwhile some guy on the internet made a killing during all of this by investing in he newest crypto currency. It seems pretty legitimate.

This is well within the bounds of possibility. Buying the market gives you market returns, and sometimes that means losing a lot of money. We accept this because it seems to be the best option available. You need to be prepared to have discipline even when times are tough. No - *especially* when times are tough.

staythecourse
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Re: Emotional Investor - I'm a mess and need help!

Post by staythecourse » Mon Sep 24, 2018 8:50 am

Glad to hear you speak up. In reality, my advice is to figure out your short term (within 2 years), intermediate (5-6 years), and long term goals (10+) professionally (money for any more startup ideas) and personally (monthly expenses, house, retirement, kid costs, etc...).

Then find a NEW adviser. There is no doubt in my mind you should NOT be running your own money. You gave it a go and admittedly have not done well at it. Find an adviser you feel comfortable with (THAT YOU ARE NOT RELATED TO). Mixing money and relationships are never a good idea.

Your only job is to find one you feel comfortable with and then tell them what your short, intermediate, and long term goals are and let them do the work. If you choose someone ethical they will do the rest and make sure you have the money to accomplish each goal at the appropriate time period.

It is hard to hear, but not everyone should be handling their own money. If you can't handle your money at this point even though you are intelligent AND have been on this board means you needs somebody else's help. I can guarantee you will end up with a higher net worth at 80 doing this route then continuing to do the same thing over and over and over again.

The reason I do not like behavioral finance is they are great at explaining WHY you make the mistakes you do, but don't PREVENT them. It is like us physicians going, "Hey smoking gives you lung cancer so don't do it". Has that worked? No. As there is no plan to prevent folks from doing it. So just saying, "Hey do a 3 fund or target retirement fund" is not going to prevent you from making the same mistake as it is NOT eliminating the biggest problem which is you.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

barnaclebob
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Re: Emotional Investor - I'm a mess and need help!

Post by barnaclebob » Mon Sep 24, 2018 9:22 am

sruliz wrote:
Sun Sep 23, 2018 12:22 pm
...I don't like this experience since it totally removes me from any decision making. I want to feel more involved.
You have proven yourself bad a making investment decisions. Why do you want to be involved anymore than having a passive portfolio and rebalancing? Why do you think you can make your outcome better?

Don't take that as an insult. I'm bad at picking investments too, that's why I'm here. I want what the market gives, no worse no better.

JBTX
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Re: Emotional Investor - I'm a mess and need help!

Post by JBTX » Mon Sep 24, 2018 9:42 am

Finridge wrote:
Mon Sep 24, 2018 3:06 am
JBTX wrote:
Sun Sep 23, 2018 10:55 pm
I don't like this experience since it totally removes me from any decision making. I want to feel more involved.
yet still feel actively involved in my investments ......., I can't see myself investing in a 3 mutual fund portfolio either.




Until you deal with this it won't get better.
My thoughts exactly. Sruiz, you said you are a physician. Imagine that you are treating a patient who is an alcoholic. He has liver cirrhosis and other serious health issues caused by drinking, and yet he keeps drinking. He is asking you for help. You tell him that he needs to stop drinking, and he says won't do that...

The problem here is not that there is not a solution to your issues. The problem is that you are not accepting the solution.
Agreed.

Another way for OP to go about it is to redirect his obsession to something more positive. Instead of spending all of his time looking for something that will beat the market, spend that time focusing on:

- doing absolutely everything he can to save every penny he can in tax advantaged savings and other savings
- doing everything he can to avoid taxes
- doing everything he can to cut investment expenses.
- doing everything he can to cut personal expenses.
- doing everything he can to determine and optimize his asset allocation

There are a lot of obsessive people here on BH but they aren't obsessed with beating the market or finding a magic investing formula. Seems like OP wants to feel like he has succeeded in investing through his own cleverness. That desire to succeed has to be redirected to more productive means.

Luke Duke
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Re: Emotional Investor - I'm a mess and need help!

Post by Luke Duke » Mon Sep 24, 2018 1:53 pm

I am also 40 and my wife and I have never invested more than 25-30k/yr (plus company 401k match) and we have just about as much money as you do in our accounts (I'm ignoring your food truck, app and nursing home) from using a simple index fund based strategy. Obviously I've probably been investing for a longer period of time since my profession doesn't require the training/education that your's does. The point is that a boring 3-fund portfolio can build great wealth. I highly recommend reading one (or both) of the following books

The Bogleheads' Guide to Investing

The Bogleheads' Guide to the Three-Fund Portfolio

Juice3
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Re: Emotional Investor - I'm a mess and need help!

Post by Juice3 » Mon Sep 24, 2018 6:40 pm

White Coat Investor wrote:
Sun Sep 23, 2018 9:22 pm
I rarely say this, but I think you could use a good advisor (not a family member) who offers good advice at a fair price and will help protect you from your own tendencies.
I am going to second WCI's advise and go a bit further. Many here stop with goals of their own retirement. Some here go a bit further and think about legacies. Your situation is relatively unique. I think you have gone a step further and are mixing in what you want to accomplish in this life. This final step for most of us here is often limited to our "budget".

All of your goals are fine and admirable goals. Perhaps you should think about treating them separately.

1. Provide for you and your spouse / family "retirement".
(define for yourself what that means for you).

2. Acknowledge that you like to dabble with "investments" and set aside some "play" money to do so. Limit your dabbling to this play money.

3. Identify how you personal life objectives (300K in an app?) fit into your overall equation and provide yourself the ability to reach for and achieve these objectives.

A fee-only financial planner can clearly help keep you on track with the first.

A reasonable play pile, should be easily achievable with your income.

Finally, 3 is key. If you want to build a business of whatever type. Make sure you bring in the expertise needed to build a business and do not just try and do it all on your own. Be clear on how much you "invest" in this business and make 110% certain it does not interfere with goal 1 or 2.

Obviously there are different rules for your objectives. Stop mixing them together and risking bad results across the board.

Good Luck.
J
Last edited by Juice3 on Tue Sep 25, 2018 6:44 pm, edited 1 time in total.

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White Coat Investor
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Re: Emotional Investor - I'm a mess and need help!

Post by White Coat Investor » Mon Sep 24, 2018 10:18 pm

Juice3 wrote:
Mon Sep 24, 2018 6:40 pm
White Coat Investor wrote:
Sun Sep 23, 2018 9:22 pm
I rarely say this, but I think you could use a good advisor (not a family member) who offers good advice at a fair price and will help protect you from your own tendencies.

A fee based financial planner can clearly help keep you on track with the first.

I'm sure you meant fee-only, as fee-based means commissioned salesman.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

3funder
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Re: Emotional Investor - I'm a mess and need help!

Post by 3funder » Tue Sep 25, 2018 6:07 am

KlangFool wrote:
Sun Sep 23, 2018 12:48 pm
OP,

Put all your money into an all-in-one fund like Wellington fund or Vanguard LifeStrategy Moderate Growth Fund.

KlangFool
+1.

3funder
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Re: Two suggestions

Post by 3funder » Tue Sep 25, 2018 6:16 am

Taylor Larimore wrote:
Sun Sep 23, 2018 10:19 pm
sruliz:

The suggestion to use low-cost Vanguard Personal Advisor Service free of conflict-of-interest was a good one.

It may help to read my "Simplicity" link below.

Best wishes.
Taylor
+1

deltaneutral83
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Re: Emotional Investor - I'm a mess and need help!

Post by deltaneutral83 » Tue Sep 25, 2018 9:10 am

Vanguard PAS for 30 bps and relinquish control to them 100%. I don't think OP needs to be anywhere near the "buy" or "sell" button anytime in the next few years, I am surprised people have suggested OP fix this on his own. Develop another hobby that you can get consumed in so that you aren't thinking about the market. The 30 bps you pay per year will be the best investment you've made to date. Re evaluate in 2-3 years if you want to take back the reigns.

Juice3
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Re: Emotional Investor - I'm a mess and need help!

Post by Juice3 » Tue Sep 25, 2018 6:29 pm

Juice3 wrote:
Mon Sep 24, 2018 6:40 pm
White Coat Investor wrote:
Sun Sep 23, 2018 9:22 pm
I rarely say this, but I think you could use a good advisor (not a family member) who offers good advice at a fair price and will help protect you from your own tendencies.
I am going to second WCI's advise and go a bit further. Many here stop with goals of their own retirement. Some here go a bit further and think about legacies. Your situation is relatively unique. I think you have gone a step further and are mixing in what you want to accomplish in this life. This final step for most of us here is often limited to our "budget".

All of your goals are fine and admirable goals. Perhaps you should think about treating them separately.

1. Provide for you and your spouse / family "retirement".
(define for yourself what that means for you).

2. Acknowledge that you like to dabble with "investments" and set aside some "play" money to do so. Limit your dabbling to this play money.

3. Identify how you personal life objectives (300K in an app?) fit into your overall equation and provide yourself the ability to reach for and achieve these objectives.

A fee only financial planner can clearly help keep you on track with the first.

A reasonable play pile, should be easily achievable with your income.

Finally, 3 is key. If you want to build a business of whatever type. Make sure you bring in the expertise needed to build a business and do not just try and do it all on your own. Be clear on how much you "invest" in this business and make 110% certain it does not interfere with goal 1 or 2.

Obviously there are different rules for your objectives. Stop mixing them together and risking bad results across the board.

Good Luck.
J

Juice3
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Re: Emotional Investor - I'm a mess and need help!

Post by Juice3 » Tue Sep 25, 2018 6:30 pm

White Coat Investor wrote:
Mon Sep 24, 2018 10:18 pm
Juice3 wrote:
Mon Sep 24, 2018 6:40 pm
A fee based financial planner can clearly help keep you on track with the first.
I'm sure you meant fee-only, as fee-based means commissioned salesman.
Yes, you are correct. I edited in the original post.

J

sruliz
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Re: Emotional Investor - I'm a mess and need help!

Post by sruliz » Tue Sep 25, 2018 8:11 pm

Thank you everyone. I’m rereading everything here. I realize I’m the problem here and that’s why I’ve laid bare my dilemma. Thank you for all your time and advice.

GoldenFinch
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Re: Emotional Investor - I'm a mess and need help!

Post by GoldenFinch » Tue Sep 25, 2018 8:47 pm

camillus wrote:
Sun Sep 23, 2018 12:56 pm
Stated goal: Find a way to be more involved in investing.

Problem: You are a horrible investor. Sorry.

Solution: Change the goal so that you are involved as little as possible with your investing.
^^Good advice here.

You really can do better for yourself. It took discipline to become a physician. Apply some of that to your investing. You need a “set it and forget it” approach. At least you’ve identified your problem while you are still young.

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Rowan Oak
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Re: Emotional Investor - I'm a mess and need help!

Post by Rowan Oak » Tue Sep 25, 2018 9:09 pm

sruliz,

The good news is that we can learn so much about investing from the experience and often the mistakes of others.

I recommend you start by reading Jack Bogle's "Little Book of Common Sense Investing--10th Anniversary Edition". Then read it again.

You have to change your mind about what investing means to you. Otherwise, you will likely just keep repeating the past.
Last edited by Rowan Oak on Tue Sep 25, 2018 10:38 pm, edited 3 times in total.
“If you can get good at destroying your own wrong ideas, that is a great gift.” – Charlie Munger

sreynard
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Re: Emotional Investor - I'm a mess and need help!

Post by sreynard » Tue Sep 25, 2018 9:30 pm

vested1 wrote:
Sun Sep 23, 2018 1:29 pm
#1 Stop investing with friends and family.

#2-infinity See #1
+1 You do not have a friend that works at a brokerage. You think you know someone that works at a brokerage. He is not your friend. You are his cash cow. But he'll make you feel special to be milked.

Your brother may be family, but he is also not your friend. If he was your friend, he would have given you better advice, like invest with Vanguard, Fidelity, or Schwab. He is either ignorant or evil. Probably both. Not someone you want to invest your hard earned money with, but you will anyway.

Lots of good advice. Doubt you will take any of it. Recommend Vanguard Target date funds. Or hire Vanguard to manage your money. They are cheap and trustworthy. The less you have anything to do with managing your money the better. It's a skill you don't have, and from all evidence have no desire or ability to learn. Hire someone you can trust that will ignore your feelings and do the right thing for you.

If you really want to learn, try Dr. William J. Bernstein's book, "If You Can". Its on Amazon. Easy to read. Doubt it will do you any good. A good psychologist might.

Recommend you find a new hobby. Maybe wooden model boat building? Or folk guitar? Something safe and relaxing that will relieve stress instead of generating it.

Good luck

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Re: Emotional Investor - I'm a mess and need help!

Post by pkcrafter » Tue Sep 25, 2018 9:46 pm

sruliz wrote:
Tue Sep 25, 2018 8:11 pm
Thank you everyone. I’m rereading everything here. I realize I’m the problem here and that’s why I’ve laid bare my dilemma. Thank you for all your time and advice.
This is interesting. Did you know there is such a thing as a risk-taking gene? Just by my observations and the work they do, I believe many doctors have this gene. First of all, their work confronts them with life and death situations - are they drawn to medical practice? Secondly, I've noticed that most doctors who have posted on our site carry high equity, strongly aggressive portfolios. Risk takers by nature? Hmmm.

http://theconversation.com/we-uncovered ... ness-96052



Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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Googliebear
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Re: Emotional Investor - I'm a mess and need help!

Post by Googliebear » Tue Sep 25, 2018 9:57 pm

sruliz:

I've seen this before with a great uncle of mine. He retired as an anesthesiologist (practiced into his 70's) out in Phoenix and had lost a majority of his wealth twice in his life due to this kind of behavior. About two years before he passed away after losing a majority of his wealth once again, his family laid down the law and forced him to safeguard his last million in assets for his wife after losing approx 4 to 5 times that on poor "investments" decisions.

He was my mentor and I learned many of things from him; but as it came to investing, he taught me most things not to do when investing. I recognized some of these behaviors and gently (as the younger of forty years or so) tried to steer him away from some of these risky investments and behaviors, but he was a dreamer and pretty much set in his ways.

My uncle was also a very smart man in many aspects of his life and I think that was his downfall, he thought he was smart enough to manage his own money but the ultimate result showed otherwise. He shared with me some of his hopes and dreams for his money after he was gone; unfortunately that was all most of them ended up being, just dreams.

Good luck!

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