Worried about preserving my wealth

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Topic Author
speer
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Joined: Thu May 19, 2016 11:56 am

Worried about preserving my wealth

Post by speer »

assets:

$210k CAD in a HISA earning 2.5% until ~apr 2021
$5k CAD in a checking account
$25k USD cash earning 0.8% in a savings account
~$30k CAD RRSP holding BMO.ZHY [junk bonds] bought @ 13.74
~$50k CAD in a business bank account
I have no debt and live in the states

Ive always held cash using HISA, with the best being ~3.25%, but have been extremely sad seeing interest rates slowly fizzle out over the years and watching my cash rot with no where to put it.

My main concern is wealth preservation and a modest return. Ive been extremely worried about inflation , especially with the insane defecit increase during covid-19. If interest rates rise, how will the government service this debt? Inflate the debt away and cause hyperinflation?

With stocks and assets (housing, gold, etc) at an ATH its difficult to find a stable area. I dont not want to invest at ATH when we have not had a recession in ~10 years and are due for one, or are already entering one..

Where would a stable area be to invest for the short - medium term to preserve wealth and offer a modest return, without being highly impacted by a recession?
000
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Re: Worried about preserving my wealth

Post by 000 »

I assume you are Canadian? You may get better replies having a moderator move this to the non-US forum.

That aside, the fact that "everything" (real estate, stocks, gold) are at an all time high should tell you something about the long-term value of cash.

One could consider a balanced portfolio like the Permanent Portfolio.
Topic Author
speer
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Re: Worried about preserving my wealth

Post by speer »

Im dual US/Canadian.

I live in the states now and earn USD. I just still have assets in Canada, but plan on moving it over to USD in the near future.

Discussion on wealth preserveration would generally remain helpful regardless if your in Canada or USA. Please keep the thread here.
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CyclingDuo
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Re: Worried about preserving my wealth

Post by CyclingDuo »

speer wrote: Tue Sep 01, 2020 11:20 pm Im dual US/Canadian.

I live in the states now and earn USD. I just still have assets in Canada, but plan on moving it over to USD in the near future.

Discussion on wealth preserveration would generally remain helpful regardless if your in Canada or USA. Please keep the thread here.
Why do you have no investments in stock market index funds?
"Save like a pessimist, invest like an optimist." - Morgan Housel
Independent George
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Re: Worried about preserving my wealth

Post by Independent George »

Ben Felix, of Canada-based PWL Capital, explains the problem with holding on to cash:

https://www.youtube.com/watch?v=X1qzuPRvsM0

I actually partly disagree with him on DCA - just because lump sum beats DCA 2/3 of the time doesn't mean the downside risk of that 1/3 is something to be ignored. It might not be mathematically correct, but most people (including myself) are loss-averse enough that DCA still makes sense when you're dealing with a large enough sum of money. To put it another away - I lump-sum my Roth IRA every year on January 2nd, because $6k is really not a huge sum of money to me. If I were to win $1M in the lottery tommorrow, I would DCA the winnings even if it's mathematically incorrect, because the loss of $500k (or more) would hurt more than the opportunity cost of DCA.
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speer
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Re: Worried about preserving my wealth

Post by speer »

CyclingDuo wrote: Tue Sep 01, 2020 11:31 pm
speer wrote: Tue Sep 01, 2020 11:20 pm Im dual US/Canadian.

I live in the states now and earn USD. I just still have assets in Canada, but plan on moving it over to USD in the near future.

Discussion on wealth preserveration would generally remain helpful regardless if your in Canada or USA. Please keep the thread here.
Why do you have no investments in stock market index funds?
I believe stocks are bubbled and I may need the money in the next few years, which is why I want to preserve the wealth I have and have a modest return, but bonds or HISA are not doing that anymore for me. I am seeking a safer / more stable industry to invest in and am fishing for ideas mostly. Think utiltiy companies, recession proof staples, or gold or some sort of annual municpal bond. But almost everything is at such an ATH and bonds are almost near zero.

I defintley dont want to touch something like the SP500 right now. (I know I cant time the market.)
klondike
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Re: Worried about preserving my wealth

Post by klondike »

speer wrote: Tue Sep 01, 2020 11:43 pm
CyclingDuo wrote: Tue Sep 01, 2020 11:31 pm
speer wrote: Tue Sep 01, 2020 11:20 pm Im dual US/Canadian.

I live in the states now and earn USD. I just still have assets in Canada, but plan on moving it over to USD in the near future.

Discussion on wealth preserveration would generally remain helpful regardless if your in Canada or USA. Please keep the thread here.
Why do you have no investments in stock market index funds?
I believe stocks are bubbled and I may need the money in the next few years, which is why I want to preserve the wealth I have and have a modest return, but bonds or HISA are not doing that anymore for me. I am seeking a safer / more stable industry to invest in and am fishing for ideas mostly. Think utiltiy companies, recession proof staples, or gold or some sort of annual municpal bond. But almost everything is at such an ATH and bonds are almost near zero.

I defintley dont want to touch something like the SP500 right now. (I know I cant time the market.)
Well, if you need the money in the next few years, it certainly limits your choice greatly. Ladder CD, TIPS, perhaps.
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CyclingDuo
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Re: Worried about preserving my wealth

Post by CyclingDuo »

speer wrote: Tue Sep 01, 2020 11:43 pm
CyclingDuo wrote: Tue Sep 01, 2020 11:31 pm
speer wrote: Tue Sep 01, 2020 11:20 pm Im dual US/Canadian.

I live in the states now and earn USD. I just still have assets in Canada, but plan on moving it over to USD in the near future.

Discussion on wealth preserveration would generally remain helpful regardless if your in Canada or USA. Please keep the thread here.
Why do you have no investments in stock market index funds?
I believe stocks are bubbled and I may need the money in the next few years, which is why I want to preserve the wealth I have and have a modest return, but bonds or HISA are not doing that anymore for me. I am seeking a safer / more stable industry to invest in and am fishing for ideas mostly. Think utiltiy companies, or gold or some sort of annual municpal bond. But almost everything is at such an ATH and bonds are almost near zero.

I defintley dont want to touch something like the SP500 right now. (I know I cant time the market.)
May need your money in a few years?

Yes, no, may, may not? Which is it?

You've already got your high yielding junk bonds, why not mix in a little diversity for yield with corporate bonds, preferred stock, a utility index, some CD's, TIPS.

Corporate Bonds: Vanguard's VTC for US or iShares XCB for Canada
Preferred Stock: iShares PFF
Utility Index: XLU

I still think a small percentage should be in a total stock market index fund, even if it was only 10-25% of your holdings. A quick glance of your posts going back to 2016, it sounds like you simply never trusted the stock market. Had you invested in May of 2016 in the Total Stock Market Fund or S&P 500 when it was first brought up to you, you'd be up 71% to date on that portion of your portfolio. What about Vanguard's Total International Stock Index Fund? It is yielding 2.61% and is still -7.51% below the February highs.

Where were you in March, April, May, June when things were really on sale?

Regardless, you could boost your yield with a mix of all of these items, but of course they all carry more risk than a money market fund. At some point you're going to have to become an investor to get some more return.

CyclingDuo
"Save like a pessimist, invest like an optimist." - Morgan Housel
SnowBog
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Re: Worried about preserving my wealth

Post by SnowBog »

Two thoughts...

If you look at the stock market history, the majority of the time we are in "all time highs". That's a good problem!

This isn't the version I was looking for, but it might work as a substitute. But take a look at the "all time worst investor" who keeps putting their money in right before the market has the biggest 7 losses in recent history. Hint - they still come out great (the key is having an asset allocation you can STICK with and not panic sell when things fall). https://seekingalpha.com/article/416466 ... estor-ever
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AerialWombat
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Re: Worried about preserving my wealth

Post by AerialWombat »

speer wrote: Tue Sep 01, 2020 11:43 pm
CyclingDuo wrote: Tue Sep 01, 2020 11:31 pm
speer wrote: Tue Sep 01, 2020 11:20 pm Im dual US/Canadian.

I live in the states now and earn USD. I just still have assets in Canada, but plan on moving it over to USD in the near future.

Discussion on wealth preserveration would generally remain helpful regardless if your in Canada or USA. Please keep the thread here.
Why do you have no investments in stock market index funds?
I believe stocks are bubbled and I may need the money in the next few years, which is why I want to preserve the wealth I have and have a modest return, but bonds or HISA are not doing that anymore for me. I am seeking a safer / more stable industry to invest in and am fishing for ideas mostly. Think utiltiy companies, recession proof staples, or gold or some sort of annual municpal bond. But almost everything is at such an ATH and bonds are almost near zero.

I defintley dont want to touch something like the SP500 right now. (I know I cant time the market.)
“He who chases two rabbits catches none.”

If you want safety/stability, the money belongs in savings, CDs, Treasuries, quality bond funds. Yes, the return sucks right now, but it’s what you’re gonna get.

Utilities, consumer staples, etc — those are still stocks. Still volatile. It’s their nature.

You need to pick ONE objective: Return or safety. You ain’t gonna get both, and it’s a fool’s errand to try.

I chose safety, and sleep well with my choices.
annu
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Re: Worried about preserving my wealth

Post by annu »

I am also not super okay with stocks the way they are, but do believe long term economy will be sound and maybe the scenario we are seeing played out now will adjust at some point. But while this is going on, I am taking care of other debts and investing in other areas. Took care of mortgage, loans, and did a real estate deal.

So if you feel long term market is viable, find other areas you can focus on, I know in Canada, buying Condos/apartments is a great option, but you do have to get in on time.

On the other hand if you are not confident that market will recover, side hustle is how you can keep up with any inflation. If you make more, even by 2 to 3%, you can match up with current inflation rates.
With covid and remote work, there are many options possible now.

But regardless of your outlook(short term volatility or even long term problems with market), focus on saving/making more. We have been able to save almost 10% more since Covid, as no longer going out, making more food at home, no travels etc, and are focusing on 529 for kids(only picked TIPS for now), maxing HSA(I have always done REIT there so continuing with that), but making sure anything we can put away for savings, we are maxing out including 401k, where we were able to max out our contributions for the year, including backdoor. I have not invested in VTI, just did Long term treasury(VGLT) and VXUS, in 30/40 ratio, and keeping remaining 30% in money market for now.
Topic Author
speer
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Re: Worried about preserving my wealth

Post by speer »

AerialWombat wrote: Wed Sep 02, 2020 12:33 am
speer wrote: Tue Sep 01, 2020 11:43 pm
CyclingDuo wrote: Tue Sep 01, 2020 11:31 pm
speer wrote: Tue Sep 01, 2020 11:20 pm Im dual US/Canadian.

I live in the states now and earn USD. I just still have assets in Canada, but plan on moving it over to USD in the near future.

Discussion on wealth preserveration would generally remain helpful regardless if your in Canada or USA. Please keep the thread here.
Why do you have no investments in stock market index funds?
I believe stocks are bubbled and I may need the money in the next few years, which is why I want to preserve the wealth I have and have a modest return, but bonds or HISA are not doing that anymore for me. I am seeking a safer / more stable industry to invest in and am fishing for ideas mostly. Think utiltiy companies, recession proof staples, or gold or some sort of annual municpal bond. But almost everything is at such an ATH and bonds are almost near zero.

I defintley dont want to touch something like the SP500 right now. (I know I cant time the market.)
“He who chases two rabbits catches none.”

If you want safety/stability, the money belongs in savings, CDs, Treasuries, quality bond funds. Yes, the return sucks right now, but it’s what you’re gonna get.

Utilities, consumer staples, etc — those are still stocks. Still volatile. It’s their nature.

You need to pick ONE objective: Return or safety. You ain’t gonna get both, and it’s a fool’s errand to try.

I chose safety, and sleep well with my choices.
So do you invest primarily in savings, CDs, Treasuries, quality bond funds?

Even looking at TIPS, their yields are negative right now
politely
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Re: Worried about preserving my wealth

Post by politely »

If you could share your age or approximate age (or years from retirement) that would be helpful in formulating a response.
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bluquark
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Re: Worried about preserving my wealth

Post by bluquark »

It sounds like you're middle-aged or younger and these are retirement savings. In a 30+ year timeframe, stocks almost always have yielded positive real returns, even when they were bought at the worst possible times. See https://awealthofcommonsense.com/2014/0 ... ket-timer/ .

Also for a more thorough treatment of the question of whether stocks or bonds are safer over long timeframe, I recommend the book "Deep Risk" by William Bernstein. (Spoiler: stocks are safer than bonds because inflation can't be recovered from. But a diversified mix of stocks, bonds and real estate safer than either on its own.)
70/30 portfolio | Equity: global market weight | Bonds: 20% long-term munis - 10% LEMB
Topic Author
speer
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Re: Worried about preserving my wealth

Post by speer »

Im mid 20's and self employed, but dont have a traditional retirment or job projection/ideal as most. I can see myself buying (with cash) a cheap LCOL rural homestead in the next few years and living a self sufficent lifestyle with a much decreased income. I could get my expenses very low, with my major costs of living being property tax and car insurance (think early retirement extreme).

Simple living and low costs would be my ideal way of life, but I need to plan a way to preserve my savings.

I have a pretty bearish bias on stock markets and fiat in general.
rossington
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Re: Worried about preserving my wealth

Post by rossington »

speer wrote: Wed Sep 02, 2020 1:32 am Im mid 20's and self employed, but dont have a traditional retirment or job projection/ideal as most. I can see myself buying (with cash) a cheap LCOL rural homestead in the next few years and living a self sufficent lifestyle with a much decreased income. I could get my expenses very low, with my major costs of living being property tax and car insurance (think early retirement extreme).

Simple living and low costs would be my ideal way of life, but I need to plan a way to preserve my savings.

I have a pretty bearish bias on stock markets and fiat in general.
You're in your mid 20's? :oops:
Seriously, wealth preservation at your age is investing for the long term and having an emergency fund in case your business goes south. I get the wanting to hold on to your hard earned cash but you have time on your side.
You CAN'T retire on @ 300k.
Why don't you at the very least exchange your junk bonds for VTSAX (TSM) especially if wealth preservation is what you want?
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
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dogagility
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Re: Worried about preserving my wealth

Post by dogagility »

Agree with others that you should be investing a portion of your portfolio in stock index funds.

Money you will be spending in the next five/ten years can be kept in fixed income accounts... but you're unlikely to see much increase in value and may not even keep up with inflation.

Money you are targeting for longer than ten years should be invested largely (if not entirely) in stock index funds. This will provide growth of the portfolio... as long as you don't panic and sell during events like this past March.

Bottom line: Over the long-term, you will not be "preserving your wealth" by staying on your current course.
All children spill milk. Learn to smile and wipe it up. -- A Farmer's Wife
Wanderingwheelz
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Re: Worried about preserving my wealth

Post by Wanderingwheelz »

speer wrote: Tue Sep 01, 2020 11:43 pm
CyclingDuo wrote: Tue Sep 01, 2020 11:31 pm
speer wrote: Tue Sep 01, 2020 11:20 pm Im dual US/Canadian.

I live in the states now and earn USD. I just still have assets in Canada, but plan on moving it over to USD in the near future.

Discussion on wealth preserveration would generally remain helpful regardless if your in Canada or USA. Please keep the thread here.
Why do you have no investments in stock market index funds?
I believe stocks are bubbled and I may need the money in the next few years, which is why I want to preserve the wealth I have and have a modest return, but bonds or HISA are not doing that anymore for me. I am seeking a safer / more stable industry to invest in and am fishing for ideas mostly. Think utiltiy companies, recession proof staples, or gold or some sort of annual municpal bond. But almost everything is at such an ATH and bonds are almost near zero.

I defintley dont want to touch something like the SP500 right now. (I know I cant time the market.)
If you were told that you would receive a 10% return in a year by investing in the S&P500, would you still not touch it? Because that’s only the average return- nothing extraordinary.

The thing about markets at a time highs is this.. they keep making new highs despite you wishing for them to stop so you can hop on board. Entering a declining market is hard to do, too, just for a different reason- you’ll wait thinking it’ll keep falling and you can buy at even lower prices.
hudson
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Re: Worried about preserving my wealth

Post by hudson »

speer wrote: Wed Sep 02, 2020 12:53 am
So do you invest primarily in savings, CDs, Treasuries, quality bond funds?

Even looking at TIPS, their yields are negative right now
Speer,
Yes, that's the answer to wealth preservation.
I'm 0% stocks and have been since 2008. That passes the sleep test for me.
MYGA's and annuities give me heartburn.
I'd consider going into rental houses (yuck) before going back into stocks.
I'm roughly 10% Vang. Intermediate muni and 90% CDs.
At age 75 in a few years, I will probably make a move into TIPS.
We all know that interest rates are low; I just take the best available and move on.
flaccidsteele
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Re: Worried about preserving my wealth

Post by flaccidsteele »

CyclingDuo wrote: Tue Sep 01, 2020 11:31 pm
speer wrote: Tue Sep 01, 2020 11:20 pm Im dual US/Canadian.

I live in the states now and earn USD. I just still have assets in Canada, but plan on moving it over to USD in the near future.

Discussion on wealth preserveration would generally remain helpful regardless if your in Canada or USA. Please keep the thread here.
Why do you have no investments in stock market index funds?
+1 ^ this
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
dbr
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Re: Worried about preserving my wealth

Post by dbr »

speer wrote: Tue Sep 01, 2020 11:15 pm
My main concern is wealth preservation and a modest return. Ive been extremely worried about inflation
The current real yield on long TIPS is about -.5% which means that you can have absolute wealth preservation but the definition of modest return is -.5%. Sometimes life is a bowl of cherries and sometimes just the pits.

If you want to increase the return you will have to have an investment of at least a little bit in stocks. Taken in the long term holding about 20% in stocks with some conservative bonds is a balance of low risk and optimum possible return. The Vanguard LifeStrategy Income fund accomplishes that at an 80/20 asset allocation and a 0.11% ER. If one does not like the international stocks and bonds one can have the same asset allocation with total stock market and total bond market or even with just an intermediate Treasury fund or including largely a TIPS fund.
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AerialWombat
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Re: Worried about preserving my wealth

Post by AerialWombat »

So do you invest primarily in savings, CDs, Treasuries, quality bond funds?
Yes.

30% stocks, 40% bonds, 30% cash.
tibbitts
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Re: Worried about preserving my wealth

Post by tibbitts »

speer wrote: Tue Sep 01, 2020 11:15 pm Where would a stable area be to invest for the short - medium term to preserve wealth and offer a modest return, without being highly impacted by a recession?
You're fully aware that there is no "safe" place that won't lose money after taxes and inflation, so I'm not sure why you bothered posting. Lots of us were able to earn 2% real net of taxes on cash or near-cash for years, and honestly I don't think most of us anticipated the situation we have now. A handful of people (like NYC teachers with their 7% stable value plan) still can, mostly in retirement plans. But today's situation is what it is. Sometimes you're just going to lose and have no options.
DarkHelmetII
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Re: Worried about preserving my wealth

Post by DarkHelmetII »

000 wrote: Tue Sep 01, 2020 11:19 pm One could consider a balanced portfolio like the Permanent Portfolio.
harry Browne's original 1987 book lays out the premise and the portfolio worked very well during dot com bust and great recession. Then the rewrite / update in 2012 came out and most recently with covid the portfolio has similarly held up.

While arguably too conservative for 'young people' with decades time horizon, the PP has both the theoretical foundation and decades of historical backtesting to suggest it is a reasonable option for those who desire a relatively smooth ride that is still expected to generate a real return
LeftCoastIV
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Re: Worried about preserving my wealth

Post by LeftCoastIV »

OP - you seem like a good candidate for dollar cost averaging over time into stock index funds, as a way to enter the market slowly without the risk that you happen to buy right before a sustained, prolonged bear market.

If you plan to live on a homestead, that could actually work in your favor if you stop paying attention to your stock investments and just let them grow over decades. Perhaps decide how much (if any) excess funds you will not need for the next 5 years, and DCA the rest into the market at a pace that helps you feel comfortable about the market peaks.
Topic Author
speer
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Re: Worried about preserving my wealth

Post by speer »

hudson wrote: Wed Sep 02, 2020 6:58 am
speer wrote: Wed Sep 02, 2020 12:53 am
So do you invest primarily in savings, CDs, Treasuries, quality bond funds?

Even looking at TIPS, their yields are negative right now
Speer,
Yes, that's the answer to wealth preservation.
I'm 0% stocks and have been since 2008. That passes the sleep test for me.
MYGA's and annuities give me heartburn.
I'd consider going into rental houses (yuck) before going back into stocks.
I'm roughly 10% Vang. Intermediate muni and 90% CDs.
At age 75 in a few years, I will probably make a move into TIPS.
We all know that interest rates are low; I just take the best available and move on.
I believe the stock market and housing market are massivly inflated since 2008 from QE, inflation has defintley hit these markets, but other consumer products less so. I have a fear for continued future central bank mismanagment with more QE and hyperinflation. A majority of the money banks get from QE simply go towards buybacks.

An amount invested in gold would have been wise, but its too high right now. Ive considered investing in other depressed stocks still down from covid-19 such as Delta, or dinosaurs like XOM

Image
https://www.youtube.com/watch?v=mzoX7zEZ6h4
000
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Re: Worried about preserving my wealth

Post by 000 »

speer wrote: Wed Sep 02, 2020 2:19 pm
hudson wrote: Wed Sep 02, 2020 6:58 am
speer wrote: Wed Sep 02, 2020 12:53 am
So do you invest primarily in savings, CDs, Treasuries, quality bond funds?

Even looking at TIPS, their yields are negative right now
Speer,
Yes, that's the answer to wealth preservation.
I'm 0% stocks and have been since 2008. That passes the sleep test for me.
MYGA's and annuities give me heartburn.
I'd consider going into rental houses (yuck) before going back into stocks.
I'm roughly 10% Vang. Intermediate muni and 90% CDs.
At age 75 in a few years, I will probably make a move into TIPS.
We all know that interest rates are low; I just take the best available and move on.
I believe the stock market and housing market are massivly inflated since 2008 from QE, inflation has defintley hit these markets, but other consumer products less so. I have a fear for continued future central bank mismanagment with more QE and hyperinflation. A majority of the money banks get from QE simply go towards buybacks.

An amount invested in gold would have been wise, but its too high right now. Ive considered investing in other depressed stocks still down from covid-19 such as Delta, or dinosaurs like XOM

Image
https://www.youtube.com/watch?v=mzoX7zEZ6h4
You acknowledge that QE is inflating assets by reducing the value of fiat relative thereto.

Yet you want to keeping holding fiat.

You have to get over this.

I did. By investing in a diversified portfolio. I have stocks and REITs as my largest holdings, and some cash and gold.

Good luck!
onourway
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Re: Worried about preserving my wealth

Post by onourway »

speer wrote: Wed Sep 02, 2020 2:19 pm
I believe the stock market and housing market are massivly inflated since 2008 from QE, inflation has defintley hit these markets, but other consumer products less so. I have a fear for continued future central bank mismanagment with more QE and hyperinflation. A majority of the money banks get from QE simply go towards buybacks.

An amount invested in gold would have been wise, but its too high right now. Ive considered investing in other depressed stocks still down from covid-19 such as Delta, or dinosaurs like XOM
This, I believe, is the thing that you need to get over. First of all, nobody really knows what the end effect of any policy will be. That’s why holding a mixed selection of different assets at the lowest possible cost is the core tenet here. A portfolio composed of any single asset class - including cash - is significantly more risky than one composed of a variety of assets. Further, your feelings about QE could even turn out to be correct, yet you could still be ruined financially due to the time it takes to play out (12 years and counting so far). This is not at all uncommon, and yet another argument for holding a diversified portfolio.

For someone with your risk tolerance, a portfolio of something along the lines of 25% stock, 25% real estate or gold, 25% TIPS, and 25% cash would provide far greater protection against a variety of future scenarios than making an all-in bet on any single asset.

The problem is your beliefs have boxed you into a corner, such that you were unwilling to buy any of these assets both when they were cheap in 2008 and when they are expensive today.
Topic Author
speer
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Re: Worried about preserving my wealth

Post by speer »

onourway wrote: Wed Sep 02, 2020 2:49 pm
speer wrote: Wed Sep 02, 2020 2:19 pm
I believe the stock market and housing market are massivly inflated since 2008 from QE, inflation has defintley hit these markets, but other consumer products less so. I have a fear for continued future central bank mismanagment with more QE and hyperinflation. A majority of the money banks get from QE simply go towards buybacks.

An amount invested in gold would have been wise, but its too high right now. Ive considered investing in other depressed stocks still down from covid-19 such as Delta, or dinosaurs like XOM
This, I believe, is the thing that you need to get over. First of all, nobody really knows what the end effect of any policy will be. That’s why holding a mixed selection of different assets at the lowest possible cost is the core tenet here. A portfolio composed of any single asset class - including cash - is significantly more risky than one composed of a variety of assets. Further, your feelings about QE could even turn out to be correct, yet you could still be ruined financially due to the time it takes to play out (12 years and counting so far). This is not at all uncommon, and yet another argument for holding a diversified portfolio.

For someone with your risk tolerance, a portfolio of something along the lines of 25% stock, 25% real estate or gold, 25% TIPS, and 25% cash would provide far greater protection against a variety of future scenarios than making an all-in bet on any single asset.

The problem is your beliefs have boxed you into a corner, such that you were unwilling to buy any of these assets both when they were cheap in 2008 and when they are expensive today.
I was still in grade school during the last financial crisis. Ill let this simmer in my mind and make a decision
hudson
Posts: 3257
Joined: Fri Apr 06, 2007 9:15 am

Re: Worried about preserving my wealth

Post by hudson »

speer wrote: Wed Sep 02, 2020 2:19 pm An amount invested in gold would have been wise, but its too high right now.
speer,
I don't like gold because it doesn't pay interest. There's also the problem of how to hold it, then how to cash it in.
All of that gives me heartburn. I might get a bag of say 100 silver dimes and bury it in the backyard? :)
SnowBog
Posts: 368
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Re: Worried about preserving my wealth

Post by SnowBog »

speer wrote: Wed Sep 02, 2020 3:34 pm
onourway wrote: Wed Sep 02, 2020 2:49 pm The problem is your beliefs have boxed you into a corner, such that you were unwilling to buy any of these assets both when they were cheap in 2008 and when they are expensive today.
I was still in grade school during the last financial crisis. Ill let this simmer in my mind and make a decision
Saw this in another thread, thought is was applicable here. As noted, S&P 500 has hit "all time highs" something like 200+ times over the last 7 years. You could be waiting for another 70 years for "cheaper" stocks - and may never find them...
ChiKid24 wrote: Thu Aug 06, 2020 7:12 pm The long-term annual growth rate of the S&P 500 is positive. That means it is not uncommon to be at or near "all time highs". Looking back at the last 7 years, here is the number of times the S&P hit an all time high in each of those years:

2013: 45 times
2014: 52
2015: 10
2016: 18
2017: 62
2018: 19
2019: 34

If you sold when we hit an all-time high in 2013, you would have missed out on 123% growth.
If you sold when we hit an all-time high in 2014, you would have missed out on 80% growth.
Even if you sold when it broke 3,000 in July 2019 or again this past May, you would have missed out on 12% growth.

Are you telling me "this time it's different"?
You already missed your chance earlier this year at the start of COVID. Either you didn't realize the "bargin" in front of you at the time, or you saw first hand the mirror image of your fear and thought I can't buy now, the economy is in a free fall...

And that's the problem looking at investing based on stock price. When it's high, it's "overpriced"; when it's low, it's "the economy is burning down". That's the viewpoint that causes people to "sell all their stocks" when the market goes down. And it will go down. But nobody knows when, nobody knows for how long, and nobody knows how quick of a recovery we'll see - but history shows we will see a recovery. IMHO the people that fair the worst financially are those that don't invest and those who don't take the long term view and stay the course (it can be a bumpy ride, but historically over time stocks go UP).

Personally, I had similar concerns in 2018 when I started trying to "figure this stuff out". I was so worried about "buying high"... But I'm not investing for today, or tomorrow, or even later this year. I'm investing for 10-50+ years from now, where I fully expect our economy will keep growing, and my investments will be worth significantly more than today (and today's "all time high" will look cheap - same as looking back to prices 10+ years ago).

The link (or a similar version I can't find anymore) I had shared above regarding the "all time worst market timer" put things into perspective, play the long game, stay the course, and historically you come out ahead (if you don't panic).
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Eagle33
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Re: Worried about preserving my wealth

Post by Eagle33 »

SnowBog wrote: Wed Sep 02, 2020 12:28 am This isn't the version I was looking for, but it might work as a substitute. But take a look at the "all time worst investor" who keeps putting their money in right before the market has the biggest 7 losses in recent history. Hint - they still come out great (the key is having an asset allocation you can STICK with and not panic sell when things fall). https://seekingalpha.com/article/416466 ... estor-ever
Maybe you were looking for Bob the world's worst market timer? What if You Only Invested at Market Peaks?
Rocket science is not “rocket science” to a rocket scientist, just as personal finance is not “rocket science” to a Boglehead.
bampf
Posts: 590
Joined: Thu Aug 04, 2016 6:19 pm

Re: Worried about preserving my wealth

Post by bampf »

Eagle33 wrote: Wed Sep 02, 2020 10:17 pm
SnowBog wrote: Wed Sep 02, 2020 12:28 am This isn't the version I was looking for, but it might work as a substitute. But take a look at the "all time worst investor" who keeps putting their money in right before the market has the biggest 7 losses in recent history. Hint - they still come out great (the key is having an asset allocation you can STICK with and not panic sell when things fall). https://seekingalpha.com/article/416466 ... estor-ever
Maybe you were looking for Bob the world's worst market timer? What if You Only Invested at Market Peaks?
The thing I see is that you aren't really chasing wealth preservation. What I see is you thinking you know better than the market. As rude as this may sound, $300K isn't really wealth in North America. It aint nothing but it aint really wealth. Next, if you think you know more than the market does, you are probably going to have a bad time over the long haul. I don't think many people could have predicted 2020. I have never successfully made a right call with enough granularity to change my life except that I have rather consistently saved a lot, invested in relatively stable assets (index funds) and spent less than I made.

Over the long haul, the best bet for wealth preservation is to invest in low cost index funds over a very long period of time. If you don't have a long period of time, then you have to take what the market gives. Right now it gives very little for cash/tips/bonds.

Save a lot.
Invest in things that allow you to sleep well at night (like low cost index funds).
Rinse and repeat for the next 30 years and come back and see us when you are worth millions.
politely
Posts: 72
Joined: Thu Jun 09, 2016 11:20 pm

Re: Worried about preserving my wealth

Post by politely »

rossington wrote: Wed Sep 02, 2020 2:50 am
speer wrote: Wed Sep 02, 2020 1:32 am Im mid 20's and self employed, but dont have a traditional retirment or job projection/ideal as most. I can see myself buying (with cash) a cheap LCOL rural homestead in the next few years and living a self sufficent lifestyle with a much decreased income.
You're in your mid 20's? :oops:
Seriously, wealth preservation at your age is investing for the long term and having an emergency fund in case your business goes south. I get the wanting to hold on to your hard earned cash but you have time on your side.
Everyone has a different plan, but in my opinion, mid 20s is too early to think about wealth preservation. Your current assets of about $320k is impressive, but at the same time, I think that thinking about extreme early retirement may be a bit too extreme. At your current level of assets, a 3% withdrawal rate is about $9,600 a year, and a 4% withdrawal rate is about $12,800 - but even that is based on a more diverse portfolio than you have. Life is about changes, and a house, spouse, kids, career changes, or health conditions can quickly change the math. I understand the concern about current market conditions, but keeping your money in cash equivalents is historically a very bad bet. I suggest that you take the time to read about various portfolio compositions and historical experience before you make a decision. Without knowing your specifics, I would say that most people in their 20s should be much more concerned about accumulation (or paying off debt) than preservation.
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