What is too long to stay the course?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Topic Author
sawhorse
Posts: 3745
Joined: Sun Mar 01, 2015 6:05 pm

What is too long to stay the course?

Post by sawhorse »

QQQ, the NASDAQ index fund, finally returned, in nominal dollars, to its high over 15 years ago. It's still got a ways to go to break even inflation adjusted.

Lest you think NASDAQ was a bunch of emerging tech stocks and therefore a penny stock sector index, there were major established companies in it then. Microsoft and Intel were well established. Intel went public in 1980. Cisco was the largest cap stock in the country. All three are in the Dow 30.

Those three companies are indeed tech stocks, but consider some other NASDAQ companies at the time: T Rowe Price, Northwest Airlines, Costco, MCI, Tyson Foods, Nordstrom, Bed Bath and Beyond.

Moreover, in the 15 years it's taken to recover, major companies have moved to NASDAQ such as Kraft, Marriott, ADP, Sears, KMart, Mattell, American Airlines, and Wynn. In theory, the addition of major companies in diverse industries should have accelerated the recovery.

The tech industry has also advanced and matured so much, and biotech has taken off. Yet it still hasn't been enough to recover.

We're told to buy and hold and be patient with index funds. Rebalance and invest more when it's down. But I can't help but think there has to be some point where you throw in the towel. 15 years is over a third of someone's working life, and it still needs to rise almost 40% to break even with inflation.

What is the limit for staying the course?
Last edited by sawhorse on Thu Apr 23, 2015 11:10 pm, edited 2 times in total.
User avatar
TomatoTomahto
Posts: 17100
Joined: Mon Apr 11, 2011 1:48 pm

Re: What is too long to stay the course?

Post by TomatoTomahto »

I'm not usually one for Schadenfreude, but for the folks who called me an idiot for paying down my mortgage instead of joining them in getting rich on QQQ, well, nah, it's not nice to gloat.
I get the FI part but not the RE part of FIRE.
Topic Author
sawhorse
Posts: 3745
Joined: Sun Mar 01, 2015 6:05 pm

Re: What is too long to stay the course?

Post by sawhorse »

TomatoTomahto wrote:I'm not usually one for Schadenfreude, but for the folks who called me an idiot for paying down my mortgage instead of joining them in getting rich on QQQ, well, nah, it's not nice to gloat.
But if you hadn't paid down your mortgage, you could have refinanced at today's rates! :wink:

Did you get burned in 2008?
livesoft
Posts: 85971
Joined: Thu Mar 01, 2007 7:00 pm

Re: What is too long to stay the course?

Post by livesoft »

QQQ is not an ETF that mimics the NASDAQ composite index. It is a subset of the NASDAQ composite index.

http://en.wikipedia.org/wiki/NASDAQ-100
The NASDAQ-100 is frequently confused with the Nasdaq Composite Index; the latter index (often referred to simply as "The Nasdaq") includes the stock of every company that is listed on NASDAQ (more than 3,000 altogether) and is quoted more frequently than the NASDAQ-100 in popular media.
Wiki This signature message sponsored by sscritic: Learn to fish.
Topic Author
sawhorse
Posts: 3745
Joined: Sun Mar 01, 2015 6:05 pm

Re: What is too long to stay the course?

Post by sawhorse »

livesoft wrote:QQQ is not an ETF that mimics the NASDAQ composite index. It is a subset of the NASDAQ composite index.

http://en.wikipedia.org/wiki/NASDAQ-100
The NASDAQ-100 is frequently confused with the Nasdaq Composite Index; the latter index (often referred to simply as "The Nasdaq") includes the stock of every company that is listed on NASDAQ (more than 3,000 altogether) and is quoted more frequently than the NASDAQ-100 in popular media.
You're right. The NASDAQ Composite Index broke even today. QQQ needs to rise another 10% to break even in nominal price. That makes my question even trickier about being patient and staying the course.
User avatar
Riceman
Posts: 215
Joined: Sun Aug 11, 2013 5:50 pm

Re: What is too long to stay the course?

Post by Riceman »

Phrasing the situation like this -- it takes too long to get even with one's original investment if one stays the course -- creates a sunk cost phallacy. The "problem" was the tech crash, not staying the course. If one held stocks through the tech crash and their value was decimated, that's a sunk cost that should not be part of the equation when, sitting in the aftermath of the tech crash, you are trying to decide what to do. Did keeping the same portfolio from that point underperform the return that would have been generated had one changed course to a different portfolio? If it did, is there a general lesson to be drawn from that one example? I think those would be the more pertinent questions.
livesoft
Posts: 85971
Joined: Thu Mar 01, 2007 7:00 pm

Re: What is too long to stay the course?

Post by livesoft »

Very few people put their life savings into the market at the high-water mark of the NASDAQ. Even fewer of those who did, then did not go on and invest more money over the years. Let's face it, if the course is stupid, then one should not even be on that course in the first place.
Wiki This signature message sponsored by sscritic: Learn to fish.
User avatar
Maynard F. Speer
Posts: 2139
Joined: Wed Mar 18, 2015 10:31 am

Re: What is too long to stay the course?

Post by Maynard F. Speer »

Well this is exactly why I believe every investor needs to factor in market valuation .. It might not fit neatly with the Efficient Markets model, but it perhaps helps for those moments when markets don't fit the model either ..

15 years ago US markets were overvalued (a CAPE ratio around 45 .. against a long-term average of 16) .. I don't know quite where the NASDAQ was, but its sector allocation may have distorted valuation anyway ... From that starting point, you wouldn't really expect to beat inflation - you were buying on a huge premium ..

As long as you always buy at reasonable or cheap value, those 15 year stretches of underperformance become very rare - diversify and they become even rarer ... Because *not* staying the course is much more likely to backfire .. Unless markets hit those 45 valuations again
"Economics is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions." - John Maynard Keynes
TradingPlaces
Posts: 1245
Joined: Sun Nov 09, 2014 12:19 pm
Location: 30.286029, -97.530011

Re: What is too long to stay the course?

Post by TradingPlaces »

sawhorse wrote:
TomatoTomahto wrote:I'm not usually one for Schadenfreude, but for the folks who called me an idiot for paying down my mortgage instead of joining them in getting rich on QQQ, well, nah, it's not nice to gloat.
But if you hadn't paid down your mortgage, you could have refinanced at today's rates! :wink:

Did you get burned in 2008?
You can always refinance at today's rates.
TradingPlaces
Posts: 1245
Joined: Sun Nov 09, 2014 12:19 pm
Location: 30.286029, -97.530011

Re: What is too long to stay the course?

Post by TradingPlaces »

sawhorse wrote: [long comment about QQQ remove]

What is the limit for staying the course?
I fail to see the connection here.

Second, even the original part of the post, somehow lamenting the fact that Nasdaq composite index still has not reached the high watermark from, there are a few key details missing:

- you could always look at the 2-3 years before the top was reached in 2000, and see huge appreciation. Assuming you put all your money into Nasdaq composite index 3 years before the top was reached, not only will you not be missing much losses, but also, you would have been at about the same level in less than 5 years,

- somehow you assume that you bought at the top. What kind of "stay the course" strategy is that?

- 15 years of someones life. Confusing. You are not adding more savings during those 15 years? On the other hand, if you are in your withdrawal phase, then: (a) you should not be 100% stocks, (b) your stock allocation should not be so heavily overweight in one sector,

- short of retiring the year when Nasdaq topped, I don't see any issues here. But even if you did retire the year Nasdaq topped, assuming you did not accelerate your retirement timeline due to the high returns over the 3 years preceeding 2000, then you should be OK. Maybe even better than ok, because (a) you would have shifted more of your allocation to bonds, (b) because stocks were overweight so much, so sold a lot of stock. E.g., if you were 70% stocks, 30% bonds in 1997, then you got a lot of appreciation in the 3 years to the top. Like 2x appreciation in SP500. If you rebalanced to a more reasonable 50-50, you would have sold quite a bit of stock near highs,
User avatar
HardKnocker
Posts: 2063
Joined: Mon Oct 06, 2008 11:55 am
Location: New Jersey USA

Re: What is too long to stay the course?

Post by HardKnocker »

The Captain of the Titanic stayed on course too long.

Image
“Gold gets dug out of the ground, then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility.”--Warren Buffett
Rodc
Posts: 13601
Joined: Tue Jun 26, 2007 9:46 am

Re: What is too long to stay the course?

Post by Rodc »

livesoft wrote:Very few people put their life savings into the market at the high-water mark of the NASDAQ. Even fewer of those who did, then did not go on and invest more money over the years. Let's face it, if the course is stupid, then one should not even be on that course in the first place.
This.

Plus NASDAQ is really a sector bet. Not a total market or even a broad market investment.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
topos
Posts: 196
Joined: Wed Jan 28, 2009 8:47 pm

Re: What is too long to stay the course?

Post by topos »

Riceman wrote:Phrasing the situation like this -- it takes too long to get even with one's original investment if one stays the course -- creates a sunk cost phallacy. The "problem" was the tech crash, not staying the course. If one held stocks through the tech crash and their value was decimated, that's a sunk cost that should not be part of the equation when, sitting in the aftermath of the tech crash, you are trying to decide what to do. Did keeping the same portfolio from that point underperform the return that would have been generated had one changed course to a different portfolio? If it did, is there a general lesson to be drawn from that one example? I think those would be the more pertinent questions.
+1
The question is indeed if switching to another portfolio after the tech crash happened will have provide better return. I bet depending when, and to switch other portfolio, will bring different results.
User avatar
TomatoTomahto
Posts: 17100
Joined: Mon Apr 11, 2011 1:48 pm

Re: What is too long to stay the course?

Post by TomatoTomahto »

sawhorse wrote:
TomatoTomahto wrote:I'm not usually one for Schadenfreude, but for the folks who called me an idiot for paying down my mortgage instead of joining them in getting rich on QQQ, well, nah, it's not nice to gloat.
But if you hadn't paid down your mortgage, you could have refinanced at today's rates! :wink:

Did you get burned in 2008?
No, I didn't get burned in 2008, but by then my mortgage was gone, so I was investing in broad market indices and stayed the course as much out of stubbornness/inertia as philosophy. It was a bit scary, but I also had TIPS, which were less scary.
I get the FI part but not the RE part of FIRE.
User avatar
TomatoTomahto
Posts: 17100
Joined: Mon Apr 11, 2011 1:48 pm

Re: What is too long to stay the course?

Post by TomatoTomahto »

livesoft wrote:Very few people put their life savings into the market at the high-water mark of the NASDAQ. Even fewer of those who did, then did not go on and invest more money over the years. Let's face it, if the course is stupid, then one should not even be on that course in the first place.
At the time, I was working at a second-tier investment bank in the technology area. You'd be amazed at what some people did, completely assured that they were winning the lottery via QQQ. They were young, and I assume most of them have recovered by now, but they were "all in" and leveraged to boot. Paradoxically, it was their "true believer" lack of doubt that helped keep me from joining them.
I get the FI part but not the RE part of FIRE.
Grt2bOutdoors
Posts: 25617
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: What is too long to stay the course?

Post by Grt2bOutdoors »

TomatoTomahto wrote:I'm not usually one for Schadenfreude, but for the folks who called me an idiot for paying down my mortgage instead of joining them in getting rich on QQQ, well, nah, it's not nice to gloat.
I recall being the contrarian sitting in a classroom taking an investment analysis course, the professor held the CFA charter and was constantly crowing that three letter distinction qualified him as an investment expert. (Actually, it attested that he passed 3 different exams and was employed in some investment capacity at some point in his work life). I say I was a contrarian because I was the only one in a classroom of 25 adults challenging his analysis that the QQQ was the only investment to be bought now and held for the future. :o The time was April 2000. Well, now, talk about eating crow. :twisted: Unfortunately, like John Bogle, when you are the outlier with the consensus that may be wrong or right or in-between, you have to have strong moral conviction to stay the course, very strong. There are a lot of lemmings out there, it pays to avoid the crowd you just have to be patient.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Professor Emeritus
Posts: 2628
Joined: Mon Aug 13, 2012 6:43 am

Re: What is too long to stay the course?

Post by Professor Emeritus »

HardKnocker wrote:The Captain of the Titanic stayed on course too long.
:happy I will simply repeat that "stay the course" is a horse racing not a maritime term :happy

viewtopic.php?f=10&t=130693#p1924995
Grt2bOutdoors
Posts: 25617
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: What is too long to stay the course?

Post by Grt2bOutdoors »

Professor Emeritus wrote:
HardKnocker wrote:The Captain of the Titanic stayed on course too long.
:happy I will simply repeat that "stay the course" is a horse racing not a maritime term :happy

viewtopic.php?f=10&t=130693#p1924995
We should let the maritime expert voice his opinion. Where is Taylor Larimore? :happy
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
User avatar
HardKnocker
Posts: 2063
Joined: Mon Oct 06, 2008 11:55 am
Location: New Jersey USA

Re: What is too long to stay the course?

Post by HardKnocker »

Professor Emeritus wrote:
HardKnocker wrote:The Captain of the Titanic stayed on course too long.
:happy I will simply repeat that "stay the course" is a horse racing not a maritime term :happy

viewtopic.php?f=10&t=130693#p1924995
It's rumored Nelson said this at Trafalgar:

"Stay the course and damn the torpedoes! Full speed ahead!"
“Gold gets dug out of the ground, then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility.”--Warren Buffett
dbr
Posts: 46137
Joined: Sun Mar 04, 2007 8:50 am

Re: What is too long to stay the course?

Post by dbr »

Professor Emeritus wrote:
HardKnocker wrote:The Captain of the Titanic stayed on course too long.
:happy I will simply repeat that "stay the course" is a horse racing not a maritime term :happy

viewtopic.php?f=10&t=130693#p1924995
This is the first hit on Google:

http://en.wikipedia.org/wiki/Stay_the_course

In that article the reference is military and the opposite is "cut and run" or "cowardly retreat." It would seem that the term might be interpreted as an admonition not to sell out of risky investments in a panic at a low point.

As far as nautical analogies, the term is "hold your course" and it means to continue to sail on the same compass heading you have been sailing on. In the case of rules of right of way at sea or in sailboat racing the relevance is that if you have right of way in a conflict the understanding is that the other boat will maneuver while counting on you to continue in the direction you are going.
User avatar
Kenkat
Posts: 9539
Joined: Thu Mar 01, 2007 10:18 am
Location: Cincinnati, OH

Re: What is too long to stay the course?

Post by Kenkat »

One, you have the luxury of hindsight to be able to pick out a particular point in time and say, look - zero return for the past 15 years. While that is true, it is also true that at the beginning of that period of time, you really would have had no idea how things would look 15 years later. Yes, you could say valuations were high and things were likely to end badly, but you don't really know. If it were to double from here in the next 5 years, we probably wouldn't have anything to talk about at the 20 year mark.

Two, I think you do have to recognize that stocks are inherently risky. I hear people sometimes act as if stocks are guaranteed not to lose money if you are willing to wait long enough. Sometimes "long enough" is considered to be as short as 10 years, sometimes less. I had someone say to me once that the Vanguard Small Cap Value Index would not lose money over a 10 year period. When I said it could, they replied that if I believed that, I shouldn't invest in it. I just quietly thought to myself "you may be in for a surprise someday". There was a point in 2009 where my statement WAS true. I've held that fund for 15 years now but who know what could happen tomorrow. Stocks ARE risky.

Three, all that said, no one really invests a lump sum at the peak of the market in a specific sector like Nasdaq. I probably shouldn't say "no one" because some poor souls probably did. But if you follow the basic principles here, you wouldn't do that. You'd be buying bonds and TSM and internationally probably and maybe even REIT and Value and Emerging Markets and many other things that didn't suffer the fall that the Nasdaq did. And you would have bought all of these things at different times, sometimes at high prices and sometimes at low prices. Because you did stay the course.

I was an investor in 1999-2000 and it was certainly a crazy time, but because of a diversified value slant, I actually made a small amount of positive return in 2000 and only a small, less than 5% loss in 2001 before taking it somewhat on the chin in 2002. But I stuck with it, and again in 2008 and 2009 and I have done ok; pretty well actually considering all that has happened in the world since 1999.

So, I haven't hit my limit for staying the course - in fact, all the ups and downs over the last 15 years have reinforced that staying the course is the right move.
User avatar
Kenkat
Posts: 9539
Joined: Thu Mar 01, 2007 10:18 am
Location: Cincinnati, OH

Re: What is too long to stay the course?

Post by Kenkat »

HardKnocker wrote:
Professor Emeritus wrote:
HardKnocker wrote:The Captain of the Titanic stayed on course too long.
:happy I will simply repeat that "stay the course" is a horse racing not a maritime term :happy

viewtopic.php?f=10&t=130693#p1924995
It's rumored Nelson said this at Trafalgar:

"Stay the course and damn the torpedoes! Full speed ahead!"
The second half of that quote is typically attributed to Admiral David Farragut at the Battle of Mobile Bay in the American Civil War.
pkcrafter
Posts: 15461
Joined: Sun Mar 04, 2007 11:19 am
Location: CA
Contact:

Re: What is too long to stay the course?

Post by pkcrafter »

Wow, sawhorse, your post raises an array of fundamental points and questions. I'll mention just a few major ones.
What is the limit for staying the course?
There is no limit for staying the course IF you've set a proper course. No Boglehead would have suggested anyone put 100% of assets into the NASDAQ in the late 90s--and yet, many did and suffered life changing, non-recoverable losses. It took 15 years for the NASDAQ to hit previous high, and it took the Dow 25 years to hit previous high after the 1929 crash. That doesn't mean it took 25 years to recover your money, but the amount of time it does take can vary widely. Good example of why you should diversify and never put 100% of invested money into equities. Some Bogleheads follow this advice, while others ignore it.

You don't know how much you can lose, nor how long it will take to recover. Yes, that's what that equity risk means. Assuming the market will "always" do anything is a huge presumption. The NASDAQ lost 79%, the S&P ~50% in the tech crash. An 80% loss takes almost 400% in gains to recover. A 50% loss requires 100%.

Valuations and P/E 10 were at the highest level ever recorded in 2000, and I believe there have only been 3 times that PE10 has been over 27--1929, 2000, 2015. Are Bogleheads staying the course?

The tech bubble, like all extreme market changes, was fueled by flawed investor behavior. "It's different this time" they yelled. Successful investors must step out of the excitement and maintain their IPS. In other words, stay the course. This is not the time to decide you really should have more in healthcare.

Take a look at these two links and ask yourself, is one more accurate than the other. Does one make you a little nervous. Hmm, which one?

http://finance.yahoo.com/blogs/talking- ... 52153.html

http://www.forbes.com/sites/chriswright ... e-in-2016/


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.
Fallible
Posts: 8795
Joined: Fri Nov 27, 2009 3:44 pm

Re: What is too long to stay the course?

Post by Fallible »

Rodc wrote:
livesoft wrote:Very few people put their life savings into the market at the high-water mark of the NASDAQ. Even fewer of those who did, then did not go on and invest more money over the years. Let's face it, if the course is stupid, then one should not even be on that course in the first place.
This.

Plus NASDAQ is really a sector bet. Not a total market or even a broad market investment.
pkcrafter wrote:...
There is no limit for staying the course IF you've set a proper course. No Boglehead would have suggested anyone put 100% of assets into the NASDAQ in the late 90s--and yet, many did and suffered life changing, non-recoverable losses. ...
These.

Good reminders that there is a first part to 'stay the course': invest wisely.
Last edited by Fallible on Fri Apr 24, 2015 6:36 pm, edited 1 time in total.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
Professor Emeritus
Posts: 2628
Joined: Mon Aug 13, 2012 6:43 am

Re: What is too long to stay the course?

Post by Professor Emeritus »

dbr wrote:
Professor Emeritus wrote:
HardKnocker wrote:The Captain of the Titanic stayed on course too long.
:happy I will simply repeat that "stay the course" is a horse racing not a maritime term :happy

viewtopic.php?f=10&t=130693#p1924995
This is the first hit on Google:

http://en.wikipedia.org/wiki/Stay_the_course

In that article the reference is military and the opposite is "cut and run" or "cowardly retreat." It would seem that the term might be interpreted as an admonition not to sell out of risky investments in a panic at a low point.

As far as nautical analogies, the term is "hold your course" and it means to continue to sail on the same compass heading you have been sailing on. In the case of rules of right of way at sea or in sailboat racing the relevance is that if you have right of way in a conflict the understanding is that the other boat will maneuver while counting on you to continue in the direction you are going.
The original post points out that the wiki is simply wrong.
As a onetime sailboat racer I have at least a passing familiarity with privileged and burdened vessels(NB I was ballast not helmsman)
and you hold a course by holding the tiller or wheel (and of course making the necessary adjustments)


Now we're started for the Cup, my Sweet Marie
Weight for age and owners up, my Sweet Marie
Owners up, just now I own,
But the way you're waltzing roun'
Sure, 'twill soon be owners down, Sweet Marie.
Hould your hould, Sweet Marie:
Pass the colt, SweetMarie.
Och, you've gone and lost the Farmers' Cup for me.
You're a stayer too, I fnd:
But you're not the proper kind
For you stay too far behind, Sweet Marie

Percy French lat 19th century
gkaplan
Posts: 7034
Joined: Sat Mar 03, 2007 7:34 pm
Location: Portland, Oregon

Re: What is too long to stay the course?

Post by gkaplan »

I need a Dramamine.
Gordon
555
Posts: 4955
Joined: Thu Dec 24, 2009 6:21 am

Re: What is too long to stay the course?

Post by 555 »

QQQ is for landlubbers! :oops:
fortyofforty
Posts: 2083
Joined: Wed Mar 31, 2010 12:33 pm

Re: What is too long to stay the course?

Post by fortyofforty »

Professor Emeritus wrote:
HardKnocker wrote:The Captain of the Titanic stayed on course too long.
:happy I will simply repeat that "stay the course" is a horse racing not a maritime term :happy

viewtopic.php?f=10&t=130693#p1924995
And once again I learn something from a fellow Boglehead.

From Etymology Online Dictionary:
Phrase stay the course is originally (1885) in reference to horses holding out till the end of a race.
Well, son of a gun. :)
Topic Author
sawhorse
Posts: 3745
Joined: Sun Mar 01, 2015 6:05 pm

Re: What is too long to stay the course?

Post by sawhorse »

livesoft wrote:Very few people put their life savings into the market at the high-water mark of the NASDAQ.
Actually....
Rodc wrote:Plus NASDAQ is really a sector bet. Not a total market or even a broad market investment.
In hindsight that's what people are saying, but if you look at the actual holdings in the NASDAQ at the time, it had more diversity than people remember. See the companies I listed in my first post.
Grt2bOutdoors wrote: I recall being the contrarian sitting in a classroom taking an investment analysis course, the professor held the CFA charter and was constantly crowing that three letter distinction qualified him as an investment expert. (Actually, it attested that he passed 3 different exams and was employed in some investment capacity at some point in his work life). I say I was a contrarian because I was the only one in a classroom of 25 adults challenging his analysis that the QQQ was the only investment to be bought now and held for the future.
In defense of your classmates, I think several of them may have felt the same way as you but didn't want to argue with the professor.
kenschmidt wrote:I hear people sometimes act as if stocks are guaranteed not to lose money if you are willing to wait long enough. Sometimes "long enough" is considered to be as short as 10 years, sometimes less.
I guess with my age, 10 years is a long time, and 15 years is an eternity. Still, 15 years is a third of someone's working life.
pkcrafter wrote: There is no limit for staying the course IF you've set a proper course.

Good point.
rustymutt
Posts: 4001
Joined: Sat Mar 07, 2009 11:03 am

Re: What is too long to stay the course?

Post by rustymutt »

HardKnocker wrote:The Captain of the Titanic stayed on course too long.

Image

He was just misguided.
Even educators need education. And some can be hard headed to the point of needing time out.
aaaaaaabbbbbbbbbb
Posts: 133
Joined: Sat Apr 11, 2015 12:34 am

Re: What is too long to stay the course?

Post by aaaaaaabbbbbbbbbb »

The answer to this question is the same as the answer to all questions of this kind: don't have an investment plan wherein you take all your savings (past, present, and future) and make only a single lump-sum investment in a poorly diversified stock fund at a point in time where PE ratios are at a record high. If you make regular contributions (e.g. a portion of every paycheck) to a diversified stock portfolio, and then later in life make regular small withdrawals, then you don't have to concern yourself with scenarios where you make a single investment at the absolute peak of a bubble (and/or make a total withdrawal at the nadir of a crash).

The way I see it, it's encouraging that it only took 15 years to recover from such a mistake.
555
Posts: 4955
Joined: Thu Dec 24, 2009 6:21 am

Re: What is too long to stay the course?

Post by 555 »

Let's vote!
What's more annoying?
[_] The cherry picked time interval.
[_] The cherry picked mutual fund.
dbr
Posts: 46137
Joined: Sun Mar 04, 2007 8:50 am

Re: What is too long to stay the course?

Post by dbr »

555 wrote:Let's vote!
What's more annoying?
[_] The cherry picked time interval.
[_] The cherry picked mutual fund.
Both are a problem, but I think the cherry picked time interval is the more dangerous of the two because it is an error that can apply even when the investment plan and fund selection is sound. Avoiding cherry picking of funds is more obviously easy to do. Cherry picking the time interval includes the truly insidious error of recency.
User avatar
baw703916
Posts: 6681
Joined: Sun Apr 01, 2007 1:10 pm
Location: Seattle

Re: What is too long to stay the course?

Post by baw703916 »

Warren Buffett wrote: our favorite holding period is forever
--1988 Chairman's Letter
Last edited by baw703916 on Fri Apr 24, 2015 7:10 pm, edited 1 time in total.
Most of my posts assume no behavioral errors.
Topic Author
sawhorse
Posts: 3745
Joined: Sun Mar 01, 2015 6:05 pm

Re: What is too long to stay the course?

Post by sawhorse »

In defense of the cherry picked time interval: These dates are often chosen because they reflect investor behavior. Many people did in fact sink a lot into the NASDAQ at the time, sometimes all at once, so it's not inappropriate to use it as a chronological starting point.
User avatar
galeno
Posts: 2653
Joined: Fri Dec 21, 2007 11:06 am

Re: What is too long to stay the course?

Post by galeno »

Lesson here is that concentrated bets on a slice of the all world all cap equity index (AWACEI) is speculation. That's why our only equity holding is the AWACEI.
KISS & STC.
itstoomuch
Posts: 5343
Joined: Mon Dec 15, 2014 11:17 am
Location: midValley OR

Re: What is too long to stay the course?

Post by itstoomuch »

When you realize that changing is no more of a detriment than keeping the status quo. :oops:

A series of observations made me change. :annoyed
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo
Topic Author
sawhorse
Posts: 3745
Joined: Sun Mar 01, 2015 6:05 pm

Re: What is too long to stay the course?

Post by sawhorse »

itstoomuch wrote:When you realize that changing is no more of a detriment than keeping the status quo. :oops:

A series of observations made me change. :annoyed
Can you elaborate?
User avatar
abuss368
Posts: 27850
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: What is too long to stay the course?

Post by abuss368 »

We stay the course forever. Newhart is the alternative?
John C. Bogle: “Simplicity is the master key to financial success."
wolf359
Posts: 3206
Joined: Sun Mar 15, 2015 8:47 am

Re: What is too long to stay the course?

Post by wolf359 »

I saw the answer in someone's tagline here on Bogleheads. I can't find it again, so I don't know whose.

I'll paraphrase it the best I can remember.

"When your horse dies, the best strategy is to dismount."
User avatar
Taylor Larimore
Posts: 32839
Joined: Tue Feb 27, 2007 7:09 pm
Location: Miami FL

Re: What is too long to stay the course?

Post by Taylor Larimore »

We should let the maritime expert voice his opinion. Where is Taylor Larimore? :happy
Grt2bOutdoors:

Sometimes it is better to remain silent. :wink:

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
itstoomuch
Posts: 5343
Joined: Mon Dec 15, 2014 11:17 am
Location: midValley OR

Re: What is too long to stay the course?

Post by itstoomuch »

sawhorse wrote:
itstoomuch wrote:When you realize that changing is no more of a detriment than keeping the status quo. :oops:

A series of observations made me change. :annoyed
Can you elaborate?
Are of that certain age? or younger? :annoyed

The circumstances and signs of the Great Recession are now well known. We were 61/58yo in 2008 and were about ready to pull the rip cord. The 3 final observations: 1) the National Politics of Sept-Nov 2008 and Again Feb-April 2009. 2) The semi annual asset report of the Fund (we were balanced investors-Growth & Income, Large Cap). 3) The look of fear in older brother eyes. (risk management at Big Bank).

Determined that we had to go 1) all Equity in order to capture any stock recovery. 2) Protect any further downside risk . :idea:
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo
User avatar
stemikger
Posts: 4950
Joined: Thu Apr 08, 2010 5:02 am

Re: What is too long to stay the course?

Post by stemikger »

TomatoTomahto wrote:I'm not usually one for Schadenfreude, but for the folks who called me an idiot for paying down my mortgage instead of joining them in getting rich on QQQ, well, nah, it's not nice to gloat.
+1
I can't tell you how many people told me not to pay off my mortgage. My Father-in-Law told me it makes no sense. My response to him was as far as I know, they never foreclosed on a home with no mortgage. I'm 50 with no mortgage he is 80 and still carries one.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!
User avatar
stemikger
Posts: 4950
Joined: Thu Apr 08, 2010 5:02 am

Re: What is too long to stay the course?

Post by stemikger »

livesoft wrote:Very few people put their life savings into the market at the high-water mark of the NASDAQ. Even fewer of those who did, then did not go on and invest more money over the years. Let's face it, if the course is stupid, then one should not even be on that course in the first place.
I met a guy several months after the Tech bubble ended. He was actually temping where I worked and I was his supervisor. A real nice guy and I noticed he was very smart. We became friendly and he told me he was a fool and lost his life savings due to investing in Tech companies. He also mentioned something about a law suit which I didn't understand. It sounds like he was day trading if my memory serves me. The one thing I remember is he said he lost a million dollars. Ouch.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!
GoldenFinch
Posts: 2728
Joined: Mon Nov 10, 2014 10:34 pm

Re: What is too long to stay the course?

Post by GoldenFinch »

stemikger wrote:
TomatoTomahto wrote:I'm not usually one for Schadenfreude, but for the folks who called me an idiot for paying down my mortgage instead of joining them in getting rich on QQQ, well, nah, it's not nice to gloat.
+1
I can't tell you how many people told me not to pay off my mortgage. My Father-in-Law told me it makes no sense. My response to him was as far as I know, they never foreclosed on a home with no mortgage. I'm 50 with no mortgage he is 80 and still carries one.
We are in our late 40's and paying off our mortgage was the smartest financial decision we ever made. I wanted to pay it off years earlier, but I was dissuaded by well meaning highly educated people in my family and at work who showed me why mortgages were the best thing and why I always should have one. I knew nothing about money except how to earn it and how to spend it, but paying interest to get a tax write off just didn't feel right. Had I listened to myself earlier we would have had our mortgage paid off around the year 2000 and avoided huge losses in the stock market because our money would have been in our house. Also, we could have used the 2k a month payment for our kids and for investing.
User avatar
ResearchMed
Posts: 16767
Joined: Fri Dec 26, 2008 10:25 pm

Re: What is too long to stay the course?

Post by ResearchMed »

stemikger wrote:
TomatoTomahto wrote:I'm not usually one for Schadenfreude, but for the folks who called me an idiot for paying down my mortgage instead of joining them in getting rich on QQQ, well, nah, it's not nice to gloat.
+1
I can't tell you how many people told me not to pay off my mortgage. My Father-in-Law told me it makes no sense. My response to him was as far as I know, they never foreclosed on a home with no mortgage. I'm 50 with no mortgage he is 80 and still carries one.
Just to be clear, I think the authorities can foreclose if you don't pay taxes, and in some states, a condo association can foreclose and auction off the condo if association fees aren't paid.

RM
This signature is a placebo. You are in the control group.
User avatar
TomatoTomahto
Posts: 17100
Joined: Mon Apr 11, 2011 1:48 pm

Re: What is too long to stay the course?

Post by TomatoTomahto »

ResearchMed wrote:Just to be clear, I think the authorities can foreclose if you don't pay taxes, and in some states, a condo association can foreclose and auction off the condo if association fees aren't paid.
I don't doubt that they can, but I think it takes even longer than it does for a bank to foreclose for non-payment of mortgage. When we bought our house 20 years ago, I was shocked at the number and size of checks being written at the closing to cover tax liens that the then-owner had on the house. Those liens, and the owner's reluctance or inability to fix some maintenance issues in the house, caused some extra motivation to sell, from which we benefited.

Interestingly, the seller had a brand new shiny Jaguar in the garage and purchased another home, nearby, that was also much too large for a single person.
I get the FI part but not the RE part of FIRE.
User avatar
stemikger
Posts: 4950
Joined: Thu Apr 08, 2010 5:02 am

Re: What is too long to stay the course?

Post by stemikger »

ResearchMed wrote:
stemikger wrote:
TomatoTomahto wrote:I'm not usually one for Schadenfreude, but for the folks who called me an idiot for paying down my mortgage instead of joining them in getting rich on QQQ, well, nah, it's not nice to gloat.
+1
I can't tell you how many people told me not to pay off my mortgage. My Father-in-Law told me it makes no sense. My response to him was as far as I know, they never foreclosed on a home with no mortgage. I'm 50 with no mortgage he is 80 and still carries one.
Just to be clear, I think the authorities can foreclose if you don't pay taxes, and in some states, a condo association can foreclose and auction off the condo if association fees aren't paid.

RM
I know that, and that is why I made sure my property taxes were affordable even if I lost my job. It is much easier to pay $3,800 per year compared to $17,500 per year.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!
fortyofforty
Posts: 2083
Joined: Wed Mar 31, 2010 12:33 pm

Re: What is too long to stay the course?

Post by fortyofforty »

The value of my home has fluctuated dramatically. It's been down below what was paid for it. It's climbed back up nicely (with the attendant increase in property taxes :oops: ). The value doesn't really matter, since nobody is forcing me to sell at any given point in time.

Similarly, the value of my stock portfolio dropped in 1987, in 1990, in 2000, in 2008.... Nobody forced me to sell at any point in time, either, so I don't see that there is a major advantage in one over the other. One day I may be forced to sell my house and downsize, or move.

There is a difference in that I can sell part of my investment portfolio, or diversity among different asset classes while reallocating the rest, but I am locked into one giant chunk of real estate that I cannot easily pick up and move. My real estate "portfolio" is horribly non-diversified, but it's a great place to have my coffee. :happy

Don't take this as me saying one approach is better or worse, or that one approach is right or wrong, just that there are many roads to the end.
peppers
Posts: 1650
Joined: Tue Oct 25, 2011 7:05 pm

Re: What is too long to stay the course?

Post by peppers »

NASDAQ..."the stock market for the next hundred years."

Remember that ad?
"..the cavalry ain't comin' kid, you're on your own..."
Post Reply