That's enough for me in 2019

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
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gmaynardkrebs
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Re: That's enough for me in 2019

Post by gmaynardkrebs » Mon Mar 25, 2019 4:12 pm

dogagility wrote:
Mon Mar 25, 2019 3:58 pm
gmaynardkrebs wrote:
Mon Mar 25, 2019 7:13 am
dogagility wrote:
Mon Mar 25, 2019 5:15 am
All it takes is a long time horizon and confidence in civilization to remain invested in stocks. Some people have it and some people don't.
Some people need to take on risk and some don't.

Of course, if you want a shot at making a lot of money from your investments, stocks are the way to go, even today, as long as you are aware of the risks. If you think the end of civilization equates with the risks of stocks, you are not aware of the risks.
I did not say stock risk equates with the end of civilization. I'm fully aware of the historical volatility of stocks over time.
I choose not to be afraid and am optimistic.
It's not just volatility. The major risk for someone saving for retirement is fat left tails. Volatility tends to sort itself out over time. Fat left tails do not; in fact, they get fatter.

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dogagility
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Re: That's enough for me in 2019

Post by dogagility » Mon Mar 25, 2019 4:15 pm

HomerJ wrote:
Mon Mar 25, 2019 4:00 pm
People who were SAVING during the the late 60s and 70s became enormously wealthy in the following bull market because they had 10-15 years of savings piled up that got multiplied.
Bingo... we have a winner! For an accumulator with a long time horizon (>10 years), having down years or a period of time with not much equity price movement is not a bad thing. This assumes that one continues to invest, and remains invested, in equities. Market timing won't work.
"The stock market is a device for transferring money from the impatient to the patient" -- Warren Buffett

H-Town
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Re: That's enough for me in 2019

Post by H-Town » Mon Mar 25, 2019 4:18 pm

gmaynardkrebs wrote:
Mon Mar 25, 2019 4:12 pm
dogagility wrote:
Mon Mar 25, 2019 3:58 pm
gmaynardkrebs wrote:
Mon Mar 25, 2019 7:13 am
dogagility wrote:
Mon Mar 25, 2019 5:15 am
All it takes is a long time horizon and confidence in civilization to remain invested in stocks. Some people have it and some people don't.
Some people need to take on risk and some don't.

Of course, if you want a shot at making a lot of money from your investments, stocks are the way to go, even today, as long as you are aware of the risks. If you think the end of civilization equates with the risks of stocks, you are not aware of the risks.
I did not say stock risk equates with the end of civilization. I'm fully aware of the historical volatility of stocks over time.
I choose not to be afraid and am optimistic.
It's not just volatility. The major risk for someone saving for retirement is fat left tails. Volatility tends to sort itself out over time. Fat left tails do not; in fact, they get fatter.
Trim the fat by having the AA appropriately to your age or your situation. Piece of cake.

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gmaynardkrebs
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Re: That's enough for me in 2019

Post by gmaynardkrebs » Mon Mar 25, 2019 4:29 pm

HomerJ wrote:
Mon Mar 25, 2019 4:00 pm
People who were SAVING during the the late 60s and 70s became enormously wealthy in the following bull market because they had 10-15 years of savings piled up that got multiplied.
The ones who got enormously wealthy in the late 60s and 70s and through much of the 80s, were the brokers and fund managers, who clipped 6% from every purchase, 6% for every sale, 6% for every redermption, and 6% even for every dividend reinvestment, and in many cases, high management fees beyond that. The average investor did not get anywhere near the returns you suggest. Thanks to Jack Bogle, things have changed for the better today in that particular regard, but I'm still not seeing a lot of clients' yachts bobbing around out there.

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dogagility
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Re: That's enough for me in 2019

Post by dogagility » Mon Mar 25, 2019 5:25 pm

gmaynardkrebs wrote:
Mon Mar 25, 2019 4:29 pm
HomerJ wrote:
Mon Mar 25, 2019 4:00 pm
People who were SAVING during the the late 60s and 70s became enormously wealthy in the following bull market because they had 10-15 years of savings piled up that got multiplied.
The ones who got enormously wealthy in the late 60s and 70s and through much of the 80s, were the brokers and fund managers, who clipped 6% from every purchase, 6% for every sale, 6% for every redermption, and 6% even for every dividend reinvestment, and in many cases, high management fees beyond that. The average investor did not get anywhere near the returns you suggest. Thanks to Jack Bogle, things have changed for the better today in that particular regard, but I'm still not seeing a lot of clients' yachts bobbing around out there.
Your red herring rebuttal has nothing to do with the ability to make money using the traditional Boglehead approach.
"The stock market is a device for transferring money from the impatient to the patient" -- Warren Buffett

Trader Joe
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Re: That's enough for me in 2019

Post by Trader Joe » Mon Mar 25, 2019 5:31 pm

market timer wrote:
Sat Mar 16, 2019 7:41 am
This is my top-calling post. Feel free to bump as we make new highs.

We are less than a quarter into 2019 and it has already been incredible year for equities and bonds. My portfolio is up 15% YTD and crossed a nice round number on Friday. Thanks to a decade of low interest rates, I've never had a chance to earn a substantial amount on interest. On Friday, I did a bit of math: $1.5M x 2.5% interest / 365 days. Wow, I could get paid over $100/day just for sitting there and waiting. So that's what I'm doing. I got out of risk assets and went to cash yesterday. Felt nice to realize substantial gains on the sales.

The mood on this forum has been rather optimistic lately. We have many discussions about leveraging both equities and bonds, more interest in derivatives than I've ever seen in the past. Cash has fared poorly for years, so people want to short it by borrowing. Meanwhile, equity valuations are high, as measured by CAPE, and bond risk and term premiums are negligible. The inverted belly of the yield curve is forecasting a downturn in a couple years, while the Fed seems entirely dependent on equity markets for direction (compare Powell's "long way from neutral" rates statement on 3rd October with his about-face in late November). Something needs to give. Either the economy is truly weak and we get a meaningful equity correction or yields need to move higher. I'm not clairvoyant, so happy to sit in cash and wait for either outcome. Also happy to lock-in a 2019 return of 15% + ca. 2% interest.
Do you have a question? I do not see a question in your original post. You may be on the wrong forum (Investing Advice Inspired by Jack Bogle).

Regardless, all the best to you.

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gmaynardkrebs
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Re: That's enough for me in 2019

Post by gmaynardkrebs » Mon Mar 25, 2019 7:07 pm

dogagility wrote:
Mon Mar 25, 2019 5:25 pm
gmaynardkrebs wrote:
Mon Mar 25, 2019 4:29 pm
HomerJ wrote:
Mon Mar 25, 2019 4:00 pm
People who were SAVING during the the late 60s and 70s became enormously wealthy in the following bull market because they had 10-15 years of savings piled up that got multiplied.
The ones who got enormously wealthy in the late 60s and 70s and through much of the 80s, were the brokers and fund managers, who clipped 6% from every purchase, 6% for every sale, 6% for every redermption, and 6% even for every dividend reinvestment, and in many cases, high management fees beyond that. The average investor did not get anywhere near the returns you suggest. Thanks to Jack Bogle, things have changed for the better today in that particular regard, but I'm still not seeing a lot of clients' yachts bobbing around out there.
Your red herring rebuttal has nothing to do with the ability to make money using the traditional Boglehead approach.
Incorrect information is rarely an aid to "making money."

james22
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Re: That's enough for me in 2019

Post by james22 » Tue Mar 26, 2019 8:50 am

EddyB wrote:
Sun Mar 24, 2019 9:25 pm
If you look at the returns from then to now and didn’t think stocks were a screaming buy...
Yeah, that's not how it works.

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Re: That's enough for me in 2019

Post by EddyB » Tue Mar 26, 2019 10:01 pm

james22 wrote:
Tue Mar 26, 2019 8:50 am
EddyB wrote:
Sun Mar 24, 2019 9:25 pm
If you look at the returns from then to now and didn’t think stocks were a screaming buy...
Yeah, that's not how it works.
I don’t think you understood the post, as evidenced by only quoting part of an “if, then” statement as if you’ve made some point. I’m just asking whether results cause the other poster to question the confidence in his or her prior view. That’s exactly how it works.

james22
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Re: That's enough for me in 2019

Post by james22 » Wed Mar 27, 2019 12:17 am

Maybe I did, Eddy.

The returns from then to now don't make stocks then a screaming buy for the same reason winning the lottery does not make buying a lottery ticket a good decision. As gmaynardkrebs wrote: Even in 2008, stocks were not the screaming buy some people who did not live through it think they were.

But if you only meant to question whether results cause the other poster to question the confidence in his or her prior view, sure that's fair. I've certainly learned the Fed trumps valuation.

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dmcmahon
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Re: That's enough for me in 2019

Post by dmcmahon » Fri Mar 29, 2019 12:39 am

gmaynardkrebs wrote:
Sun Mar 24, 2019 10:48 pm
Chris42163 wrote:
Sun Mar 24, 2019 10:43 pm
gmaynardkrebs wrote:
Sun Mar 24, 2019 10:31 pm
No. What I regret is not putting every penny I had into 30 year TIPS paying almost 4% real. That was the buy of a lifetime.
Wow, I'd love to be in something like that now, but haven't stocks significantly outperformed?
Yes, but with much more risk. TIPS got you 4% real with no risk.
Fully taxable though, including the inflation adjustments. I backed up the truck for the 10-year, but I just didn’t have enough tax-deferred space. It was a very sad day when they matured. I still haven’t fully redeployed the proceeds.

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gmaynardkrebs
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Re: That's enough for me in 2019

Post by gmaynardkrebs » Fri Mar 29, 2019 8:03 am

dmcmahon wrote:
Fri Mar 29, 2019 12:39 am
gmaynardkrebs wrote:
Sun Mar 24, 2019 10:48 pm
Chris42163 wrote:
Sun Mar 24, 2019 10:43 pm
gmaynardkrebs wrote:
Sun Mar 24, 2019 10:31 pm
No. What I regret is not putting every penny I had into 30 year TIPS paying almost 4% real. That was the buy of a lifetime.
Wow, I'd love to be in something like that now, but haven't stocks significantly outperformed?
Yes, but with much more risk. TIPS got you 4% real with no risk.
Fully taxable though, including the inflation adjustments. I backed up the truck for the 10-year, but I just didn’t have enough tax-deferred space. It was a very sad day when they matured. I still haven’t fully redeployed the proceeds.
They are state tax free, which helps.

carolinaman
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Re: That's enough for me in 2019

Post by carolinaman » Fri Mar 29, 2019 9:29 am

My problem is that I have never been able to figure out when to get out of the market, and when to get back into the market. You have to get both of those right for market timing.

Who knows what Mr Market will do. He might go up another 15% or more and then decide to crash after you buy back in next January at the higher valuation.

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gmaynardkrebs
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Re: That's enough for me in 2019

Post by gmaynardkrebs » Fri Mar 29, 2019 9:46 am

carolinaman wrote:
Fri Mar 29, 2019 9:29 am
My problem is that I have never been able to figure out when to get out of the market, and when to get back into the market. You have to get both of those right for market timing.

Who knows what Mr Market will do. He might go up another 15% or more and then decide to crash after you buy back in next January at the higher valuation.
Look, stocks can go only two ways, up or down. In the short term, the moves are completely unpredictable. Long term movements are more predictable based on CAPE10.

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dmcmahon
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Re: That's enough for me in 2019

Post by dmcmahon » Fri Mar 29, 2019 10:16 am

gmaynardkrebs wrote:
Fri Mar 29, 2019 8:03 am
dmcmahon wrote:
Fri Mar 29, 2019 12:39 am
gmaynardkrebs wrote:
Sun Mar 24, 2019 10:48 pm
Chris42163 wrote:
Sun Mar 24, 2019 10:43 pm
gmaynardkrebs wrote:
Sun Mar 24, 2019 10:31 pm
No. What I regret is not putting every penny I had into 30 year TIPS paying almost 4% real. That was the buy of a lifetime.
Wow, I'd love to be in something like that now, but haven't stocks significantly outperformed?
Yes, but with much more risk. TIPS got you 4% real with no risk.
Fully taxable though, including the inflation adjustments. I backed up the truck for the 10-year, but I just didn’t have enough tax-deferred space. It was a very sad day when they matured. I still haven’t fully redeployed the proceeds.
They are state tax free, which helps.
True, but even so, they won't produce a completely loss-free stream of income. If you've "won the game" and think you can just exit the risk markets for TIPS, that might not work unless you have everything in the tax-deferred space. Even starting from a high point like that 4% real yield, although that certainly helps. If inflation is 0% for the rest of your life, then sure, it'll work. Or if you're in the very lowest tax brackets. Otherwise, taxflation will slowly eat away at the purchasing power of your stash, and the real interest rate probably won't cover it at today's low yields (under 1% I think).

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gmaynardkrebs
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Re: That's enough for me in 2019

Post by gmaynardkrebs » Fri Mar 29, 2019 10:32 am

dmcmahon wrote:
Fri Mar 29, 2019 10:16 am
gmaynardkrebs wrote:
Fri Mar 29, 2019 8:03 am
dmcmahon wrote:
Fri Mar 29, 2019 12:39 am
gmaynardkrebs wrote:
Sun Mar 24, 2019 10:48 pm
Chris42163 wrote:
Sun Mar 24, 2019 10:43 pm

Wow, I'd love to be in something like that now, but haven't stocks significantly outperformed?
Yes, but with much more risk. TIPS got you 4% real with no risk.
Fully taxable though, including the inflation adjustments. I backed up the truck for the 10-year, but I just didn’t have enough tax-deferred space. It was a very sad day when they matured. I still haven’t fully redeployed the proceeds.
They are state tax free, which helps.
True, but even so, they won't produce a completely loss-free stream of income. If you've "won the game" and think you can just exit the risk markets for TIPS, that might not work unless you have everything in the tax-deferred space. Even starting from a high point like that 4% real yield, although that certainly helps. If inflation is 0% for the rest of your life, then sure, it'll work. Or if you're in the very lowest tax brackets. Otherwise, taxflation will slowly eat away at the purchasing power of your stash, and the real interest rate probably won't cover it at today's low yields (under 1% I think).
True, but taxflation is not a TIPS problem, it is a fact of life with all asset classes, in or out of tax-deferred. The portion of the capital gain from stocks or the interest from bonds that is purely due to inflation is taxed the same as the real gain.

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dmcmahon
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Re: That's enough for me in 2019

Post by dmcmahon » Fri Mar 29, 2019 10:29 pm

gmaynardkrebs wrote:
Fri Mar 29, 2019 10:32 am
dmcmahon wrote:
Fri Mar 29, 2019 10:16 am
gmaynardkrebs wrote:
Fri Mar 29, 2019 8:03 am
dmcmahon wrote:
Fri Mar 29, 2019 12:39 am
gmaynardkrebs wrote:
Sun Mar 24, 2019 10:48 pm
Yes, but with much more risk. TIPS got you 4% real with no risk.
Fully taxable though, including the inflation adjustments. I backed up the truck for the 10-year, but I just didn’t have enough tax-deferred space. It was a very sad day when they matured. I still haven’t fully redeployed the proceeds.
They are state tax free, which helps.
True, but even so, they won't produce a completely loss-free stream of income. If you've "won the game" and think you can just exit the risk markets for TIPS, that might not work unless you have everything in the tax-deferred space. Even starting from a high point like that 4% real yield, although that certainly helps. If inflation is 0% for the rest of your life, then sure, it'll work. Or if you're in the very lowest tax brackets. Otherwise, taxflation will slowly eat away at the purchasing power of your stash, and the real interest rate probably won't cover it at today's low yields (under 1% I think).
True, but taxflation is not a TIPS problem, it is a fact of life with all asset classes, in or out of tax-deferred. The portion of the capital gain from stocks or the interest from bonds that is purely due to inflation is taxed the same as the real gain.
True, but on stocks you don’t have to pay it annually on a mark to market basis. So the ability to defer the taxflation drag is critical.

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gmaynardkrebs
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Re: That's enough for me in 2019

Post by gmaynardkrebs » Sat Mar 30, 2019 8:06 am

dmcmahon wrote:
Fri Mar 29, 2019 10:29 pm
True, but on stocks you don’t have to pay it annually on a mark to market basis. So the ability to defer the taxflation drag is critical.
Definitely.

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willthrill81
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Re: That's enough for me in 2019

Post by willthrill81 » Sat Mar 30, 2019 10:59 am

dmcmahon wrote:
Fri Mar 29, 2019 10:29 pm
gmaynardkrebs wrote:
Fri Mar 29, 2019 10:32 am
dmcmahon wrote:
Fri Mar 29, 2019 10:16 am
gmaynardkrebs wrote:
Fri Mar 29, 2019 8:03 am
dmcmahon wrote:
Fri Mar 29, 2019 12:39 am


Fully taxable though, including the inflation adjustments. I backed up the truck for the 10-year, but I just didn’t have enough tax-deferred space. It was a very sad day when they matured. I still haven’t fully redeployed the proceeds.
They are state tax free, which helps.
True, but even so, they won't produce a completely loss-free stream of income. If you've "won the game" and think you can just exit the risk markets for TIPS, that might not work unless you have everything in the tax-deferred space. Even starting from a high point like that 4% real yield, although that certainly helps. If inflation is 0% for the rest of your life, then sure, it'll work. Or if you're in the very lowest tax brackets. Otherwise, taxflation will slowly eat away at the purchasing power of your stash, and the real interest rate probably won't cover it at today's low yields (under 1% I think).
True, but taxflation is not a TIPS problem, it is a fact of life with all asset classes, in or out of tax-deferred. The portion of the capital gain from stocks or the interest from bonds that is purely due to inflation is taxed the same as the real gain.
True, but on stocks you don’t have to pay it annually on a mark to market basis. So the ability to defer the taxflation drag is critical.
And then if you pay 0% LTCG, you benefit that much more.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Carol88888
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Re: That's enough for me in 2019

Post by Carol88888 » Sat Mar 30, 2019 2:17 pm

gmaynardkrebs wrote:
Fri Mar 29, 2019 9:46 am
carolinaman wrote:
Fri Mar 29, 2019 9:29 am
My problem is that I have never been able to figure out when to get out of the market, and when to get back into the market. You have to get both of those right for market timing.

Who knows what Mr Market will do. He might go up another 15% or more and then decide to crash after you buy back in next January at the higher valuation.
Look, stocks can go only two ways, up or down. In the short term, the moves are completely unpredictable. Long term movements are more predictable based on CAPE10.
Very true. And I don't have an answer. One day I think this market has 3-4 years to run; the next day, 18 months at best. I try to minimize regret as best as I can. I'm still 92% invested in stocks but I am now wary about re-investing the other 8% into equities so it's temporarily in short term bonds which I hope gives me a bit more stability - as well as flexibility down the road.

MotoTrojan
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Re: That's enough for me in 2019

Post by MotoTrojan » Sat Mar 30, 2019 2:23 pm

gmaynardkrebs wrote:
Fri Mar 29, 2019 9:46 am
carolinaman wrote:
Fri Mar 29, 2019 9:29 am
My problem is that I have never been able to figure out when to get out of the market, and when to get back into the market. You have to get both of those right for market timing.

Who knows what Mr Market will do. He might go up another 15% or more and then decide to crash after you buy back in next January at the higher valuation.
Look, stocks can go only two ways, up or down. In the short term, the moves are completely unpredictable. Long term movements are more predictable based on CAPE10.
Do you have proof of CAPE10’s predictive nature? Thought that myth was debunked.

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gmaynardkrebs
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Re: That's enough for me in 2019

Post by gmaynardkrebs » Sat Mar 30, 2019 3:38 pm

MotoTrojan wrote:
Sat Mar 30, 2019 2:23 pm
gmaynardkrebs wrote:
Fri Mar 29, 2019 9:46 am
carolinaman wrote:
Fri Mar 29, 2019 9:29 am
My problem is that I have never been able to figure out when to get out of the market, and when to get back into the market. You have to get both of those right for market timing.

Who knows what Mr Market will do. He might go up another 15% or more and then decide to crash after you buy back in next January at the higher valuation.
Look, stocks can go only two ways, up or down. In the short term, the moves are completely unpredictable. Long term movements are more predictable based on CAPE10.
Do you have proof of CAPE10’s predictive nature? Thought that myth was debunked.
What the historical data show is that CAPE 10 has predictive power. A fair critique is that it is backward looking, but I don't see how it could be otherwise.

MotoTrojan
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Re: That's enough for me in 2019

Post by MotoTrojan » Sat Mar 30, 2019 4:35 pm

gmaynardkrebs wrote:
Sat Mar 30, 2019 3:38 pm
MotoTrojan wrote:
Sat Mar 30, 2019 2:23 pm
gmaynardkrebs wrote:
Fri Mar 29, 2019 9:46 am
carolinaman wrote:
Fri Mar 29, 2019 9:29 am
My problem is that I have never been able to figure out when to get out of the market, and when to get back into the market. You have to get both of those right for market timing.

Who knows what Mr Market will do. He might go up another 15% or more and then decide to crash after you buy back in next January at the higher valuation.
Look, stocks can go only two ways, up or down. In the short term, the moves are completely unpredictable. Long term movements are more predictable based on CAPE10.
Do you have proof of CAPE10’s predictive nature? Thought that myth was debunked.
What the historical data show is that CAPE 10 has predictive power. A fair critique is that it is backward looking, but I don't see how it could be otherwise.
Proof of its predictive power is what I meant. I seem to recall evidence against that, except at extremes.

herpfinance
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Re: That's enough for me in 2019

Post by herpfinance » Sat Mar 30, 2019 4:44 pm

CAPE10 is far from conclusive, but its correlation to 10-year-ahead real returns was found to be 0.43 for the period 1926-2011.

https://personal.vanguard.com/pdf/s338.pdf
"The intelligent investor is a realist who sells to optimists and buys from pessimists" - Benjamin Graham

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willthrill81
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Re: That's enough for me in 2019

Post by willthrill81 » Sat Mar 30, 2019 4:58 pm

herpfinance wrote:
Sat Mar 30, 2019 4:44 pm
CAPE10 is far from conclusive, but its correlation to 10-year-ahead real returns was found to be 0.43 for the period 1926-2011.

https://personal.vanguard.com/pdf/s338.pdf
The U.S. investor average stock allocation had a whopping .83 correlation with 10 year forward S&P 500 returns from 1946-today. It's only been five years since it was proposed by the Philosophical Economist, but it's predictive ability since has continued to be remarkable.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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gmaynardkrebs
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Re: That's enough for me in 2019

Post by gmaynardkrebs » Sat Mar 30, 2019 5:11 pm

willthrill81 wrote:
Sat Mar 30, 2019 4:58 pm
herpfinance wrote:
Sat Mar 30, 2019 4:44 pm
CAPE10 is far from conclusive, but its correlation to 10-year-ahead real returns was found to be 0.43 for the period 1926-2011.

https://personal.vanguard.com/pdf/s338.pdf
The U.S. investor average stock allocation had a whopping .83 correlation with 10 year forward S&P 500 returns from 1946-today. It's only been five years since it was proposed by the Philosophical Economist, but it's predictive ability since has continued to be remarkable.
I shot 5 baskets in row this afternoon. Remarkable!

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willthrill81
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Re: That's enough for me in 2019

Post by willthrill81 » Sat Mar 30, 2019 5:15 pm

gmaynardkrebs wrote:
Sat Mar 30, 2019 5:11 pm
willthrill81 wrote:
Sat Mar 30, 2019 4:58 pm
herpfinance wrote:
Sat Mar 30, 2019 4:44 pm
CAPE10 is far from conclusive, but its correlation to 10-year-ahead real returns was found to be 0.43 for the period 1926-2011.

https://personal.vanguard.com/pdf/s338.pdf
The U.S. investor average stock allocation had a whopping .83 correlation with 10 year forward S&P 500 returns from 1946-today. It's only been five years since it was proposed by the Philosophical Economist, but it's predictive ability since has continued to be remarkable.
I shot 5 baskets in row this afternoon. Remarkable!
Don't get me wrong, I'm not betting on any of these measures. I simply grow weary from all too common praise of CAPE as some timeless, impeccable metric.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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HomerJ
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Re: That's enough for me in 2019

Post by HomerJ » Sat Mar 30, 2019 8:49 pm

gmaynardkrebs wrote:
Sat Mar 30, 2019 3:38 pm
MotoTrojan wrote:
Sat Mar 30, 2019 2:23 pm
gmaynardkrebs wrote:
Fri Mar 29, 2019 9:46 am
carolinaman wrote:
Fri Mar 29, 2019 9:29 am
My problem is that I have never been able to figure out when to get out of the market, and when to get back into the market. You have to get both of those right for market timing.

Who knows what Mr Market will do. He might go up another 15% or more and then decide to crash after you buy back in next January at the higher valuation.
Look, stocks can go only two ways, up or down. In the short term, the moves are completely unpredictable. Long term movements are more predictable based on CAPE10.
Do you have proof of CAPE10’s predictive nature? Thought that myth was debunked.
What the historical data show is that CAPE 10 has predictive power. A fair critique is that it is backward looking, but I don't see how it could be otherwise.
CAPE10 was derived in 1988 looking backwards at the previous 100 years.

Since it was derived, it has failed to predict the 10-year market returns. Since 1992, CAPE10 has been above 20 almost the entire time, which under the original model, predicted poor 10-year returns. Instead, we got decent to good returns almost the entire time. 1998-2008, 1999-2009, and 2000-2010 were the only three 10-year periods that showed poor returns that matched the model.

The other fifteen 10-year periods all showed decent-to-good returns.

CAPE10 has utterly failed as a predictive model. It's an absolute travesty and farce that people still claim CAPE10 has been a good predictive tool, since it has been wrong 83% of the time since 1992.
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Re: That's enough for me in 2019

Post by HomerJ » Sat Mar 30, 2019 8:50 pm

herpfinance wrote:
Sat Mar 30, 2019 4:44 pm
CAPE10 is far from conclusive, but its correlation to 10-year-ahead real returns was found to be 0.43 for the period 1926-2011.

https://personal.vanguard.com/pdf/s338.pdf
1926-1988 was data that was used to DERIVE the model.

You can't create a model on 1926-1988 data, and then claim those years PROVE the model works.
The J stands for Jay

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Re: That's enough for me in 2019

Post by marcopolo » Sat Mar 30, 2019 10:32 pm

HomerJ wrote:
Sat Mar 30, 2019 8:50 pm
herpfinance wrote:
Sat Mar 30, 2019 4:44 pm
CAPE10 is far from conclusive, but its correlation to 10-year-ahead real returns was found to be 0.43 for the period 1926-2011.

https://personal.vanguard.com/pdf/s338.pdf
1926-1988 was data that was used to DERIVE the model.

You can't create a model on 1926-1988 data, and then claim those years PROVE the model works.
+1 Exactly this.
Even Shiller wrote that CAPE was the result of data mining.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: That's enough for me in 2019

Post by herpfinance » Sun Mar 31, 2019 6:12 am

HomerJ wrote:
Sat Mar 30, 2019 8:49 pm
gmaynardkrebs wrote:
Sat Mar 30, 2019 3:38 pm
MotoTrojan wrote:
Sat Mar 30, 2019 2:23 pm
gmaynardkrebs wrote:
Fri Mar 29, 2019 9:46 am
carolinaman wrote:
Fri Mar 29, 2019 9:29 am
My problem is that I have never been able to figure out when to get out of the market, and when to get back into the market. You have to get both of those right for market timing.

Who knows what Mr Market will do. He might go up another 15% or more and then decide to crash after you buy back in next January at the higher valuation.
Look, stocks can go only two ways, up or down. In the short term, the moves are completely unpredictable. Long term movements are more predictable based on CAPE10.
Do you have proof of CAPE10’s predictive nature? Thought that myth was debunked.
What the historical data show is that CAPE 10 has predictive power. A fair critique is that it is backward looking, but I don't see how it could be otherwise.
CAPE10 was derived in 1988 looking backwards at the previous 100 years.

Since it was derived, it has failed to predict the 10-year market returns. Since 1992, CAPE10 has been above 20 almost the entire time, which under the original model, predicted poor 10-year returns. Instead, we got decent to good returns almost the entire time. 1998-2008, 1999-2009, and 2000-2010 were the only three 10-year periods that showed poor returns that matched the model.

The other fifteen 10-year periods all showed decent-to-good returns.

CAPE10 has utterly failed as a predictive model. It's an absolute travesty and farce that people still claim CAPE10 has been a good predictive tool, since it has been wrong 83% of the time since 1992.
That's statistics for you. Obviously a correlation of 0.43 for the period is far from perfect.
"The intelligent investor is a realist who sells to optimists and buys from pessimists" - Benjamin Graham

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Re: That's enough for me in 2019

Post by dogagility » Sun Mar 31, 2019 8:13 am

HomerJ wrote:
Sat Mar 30, 2019 8:50 pm
1926-1988 was data that was used to DERIVE the model.
You can't create a model on 1926-1988 data, and then claim those years PROVE the model works.
+1
Classic exercise in overfitting the data.
"The stock market is a device for transferring money from the impatient to the patient" -- Warren Buffett

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Re: That's enough for me in 2019

Post by Snowjob » Sun Mar 31, 2019 8:25 am

market timer wrote:
Sat Mar 16, 2019 7:41 am
I think your rational makes a lot of sense.

Risk is heightened -
The mood on this forum has been rather optimistic lately. We have many discussions about leveraging both equities and bonds, more interest in derivatives than I've ever seen in the past. Cash has fared poorly for years, so people want to short it by borrowing. Meanwhile, equity valuations are high, as measured by CAPE, and bond risk and term premiums are negligible. The inverted belly of the yield curve is forecasting a downturn in a couple years, while the Fed seems entirely dependent on equity markets for direction (compare Powell's "long way from neutral" rates statement on 3rd October with his about-face in late November). Something needs to give. Either the economy is truly weak and we get a meaningful equity correction or yields need to move higher. I'm not clairvoyant, so happy to sit in cash and wait for either outcome. Also happy to lock-in a 2019 return of 15% + ca. 2% interest.
Your need is low
...On Friday, I did a bit of math: $1.5M x 2.5% interest / 365 days....
In another thread you said 2.25M in Tips would have you step away from investing -- your 60% of the way there. Your income level is quite high relative to your expenses from my last recollection so this is not exactly a huge gap to overcome. I don't think behaviorally I could stand being in cash and watching the market climb so I could never do this personally. I could be moderately levered and take some losses, for some reason that doesn't bother me as much, but being out of the market and missing the gains seems to hurt more - perhaps just my internal wiring.

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Re: That's enough for me in 2019

Post by gmaynardkrebs » Sun Mar 31, 2019 8:41 am

Snowjob wrote:
Sun Mar 31, 2019 8:25 am
I don't think behaviorally I could stand being in cash and watching the market climb so I could never do this personally. I could be moderately levered and take some losses, for some reason that doesn't bother me as much, but being out of the market and missing the gains seems to hurt more - perhaps just my internal wiring.
More likely, you had little or nothing in the market in 2008. Correct me if I am wrong. :D

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Re: That's enough for me in 2019

Post by BogleBoogie » Sun Mar 31, 2019 8:44 am

RickBoglehead wrote:
Sat Mar 16, 2019 8:12 am
Don't know why a market timer would be on this forum since 2007.

Don't know the purpose of proclaiming to the forum that you went to cash.

Don't know what the mood on the forum has to do with where the market is going.

5 minutes I can't get back...
I don't know the purpose other than perhaps posting acts as some type of confessional? Bottom line is whether this strategy works out or not, it is market timing which is one of the basic "don't" for any Boglehead.

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Re: That's enough for me in 2019

Post by Snowjob » Sun Mar 31, 2019 9:05 am

gmaynardkrebs wrote:
Sun Mar 31, 2019 8:41 am
Snowjob wrote:
Sun Mar 31, 2019 8:25 am
I don't think behaviorally I could stand being in cash and watching the market climb so I could never do this personally. I could be moderately levered and take some losses, for some reason that doesn't bother me as much, but being out of the market and missing the gains seems to hurt more - perhaps just my internal wiring.
More likely, you had little or nothing in the market in 2008. Correct me if I am wrong. :D
Actually MarketTimer and I were both on a leverage binge at the same time during that period, both the same age and given our shared pain I felt a strange sort of kinship at the time -- misery loves company? Ultimately how we employed leverage and what we levered into was different and so were the outcomes. I reaped the rewards eventually, his recovery was a separate enterprise. While our paths have diverged since then I do follow his posts with some interest, party due to shared history, party due to the respect I have for his finance / economics expertise.

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gmaynardkrebs
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Re: That's enough for me in 2019

Post by gmaynardkrebs » Sun Mar 31, 2019 9:23 am

Snowjob wrote:
Sun Mar 31, 2019 9:05 am
gmaynardkrebs wrote:
Sun Mar 31, 2019 8:41 am
Snowjob wrote:
Sun Mar 31, 2019 8:25 am
I don't think behaviorally I could stand being in cash and watching the market climb so I could never do this personally. I could be moderately levered and take some losses, for some reason that doesn't bother me as much, but being out of the market and missing the gains seems to hurt more - perhaps just my internal wiring.
More likely, you had little or nothing in the market in 2008. Correct me if I am wrong. :D
Actually MarketTimer and I were both on a leverage binge at the same time during that period, both the same age and given our shared pain I felt a strange sort of kinship at the time -- misery loves company? Ultimately how we employed leverage and what we levered into was different and so were the outcomes. I reaped the rewards eventually, his recovery was a separate enterprise. While our paths have diverged since then I do follow his posts with some interest, party due to shared history, party due to the respect I have for his finance / economics expertise.
Thank you for the reply. Just wondering, how old were you in 2008? I'll go first -- I was 58, and man, I was unhappy to see those Vanguard statements. Fortunately, I stayed the course, but only because I was so bewildered I didn't know what else to do. I've continued to follow my bonds = age formula. I guess I'm wired different than you -- I never want to feel like I did in 2008 again, even if the market doubles next year, I could care less -- but that's age speaking as much as wisdom.

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Re: That's enough for me in 2019

Post by typical.investor » Sun Mar 31, 2019 9:31 am

gmaynardkrebs wrote:
Mon Mar 25, 2019 4:29 pm
HomerJ wrote:
Mon Mar 25, 2019 4:00 pm
People who were SAVING during the the late 60s and 70s became enormously wealthy in the following bull market because they had 10-15 years of savings piled up that got multiplied.
The ones who got enormously wealthy in the late 60s and 70s and through much of the 80s, were the brokers and fund managers, who clipped 6% from every purchase, 6% for every sale, 6% for every redermption, and 6% even for every dividend reinvestment, and in many cases, high management fees beyond that. The average investor did not get anywhere near the returns you suggest. Thanks to Jack Bogle, things have changed for the better today in that particular regard, but I'm still not seeing a lot of clients' yachts bobbing around out there.
Hey Schwab helped out too!

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Re: That's enough for me in 2019

Post by market timer » Sun Mar 31, 2019 9:59 am

Snowjob wrote:
Sun Mar 31, 2019 8:25 am
In another thread you said 2.25M in Tips would have you step away from investing -- your 60% of the way there.
That reply was specific to a question on how much is needed to live on $50K/year for life starting at age 40. Unfortunately, I spend more than that today, and am not opposed to taking on more risk in the right environment.
I don't think behaviorally I could stand being in cash and watching the market climb so I could never do this personally.
It doesn't bother me right now. I think more in terms of valuations and spreads, which are mean reverting. For example, we'll almost surely see a VIX > 30 in the next few years and high-yield credit spreads above 7.5% in the next decade. S&P might be higher or lower than today when these things happen, but I can sit on my hands until then.

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Re: That's enough for me in 2019

Post by Snowjob » Sun Mar 31, 2019 10:16 am

gmaynardkrebs wrote:
Sun Mar 31, 2019 9:23 am
Snowjob wrote:
Sun Mar 31, 2019 9:05 am
gmaynardkrebs wrote:
Sun Mar 31, 2019 8:41 am
Snowjob wrote:
Sun Mar 31, 2019 8:25 am
I don't think behaviorally I could stand being in cash and watching the market climb so I could never do this personally. I could be moderately levered and take some losses, for some reason that doesn't bother me as much, but being out of the market and missing the gains seems to hurt more - perhaps just my internal wiring.
More likely, you had little or nothing in the market in 2008. Correct me if I am wrong. :D
Actually MarketTimer and I were both on a leverage binge at the same time during that period, both the same age and given our shared pain I felt a strange sort of kinship at the time -- misery loves company? Ultimately how we employed leverage and what we levered into was different and so were the outcomes. I reaped the rewards eventually, his recovery was a separate enterprise. While our paths have diverged since then I do follow his posts with some interest, party due to shared history, party due to the respect I have for his finance / economics expertise.
Thank you for the reply. Just wondering, how old were you in 2008? I'll go first -- I was 58, and man, I was unhappy to see those Vanguard statements. Fortunately, I stayed the course, but only because I was so bewildered I didn't know what else to do. I've continued to follow my bonds = age formula. I guess I'm wired different than you -- I never want to feel like I did in 2008 again, even if the market doubles next year, I could care less -- but that's age speaking as much as wisdom.
I was 26 and scheming. Figured the future returns on investment would significantly outweigh the costs of borrowing over time and I wanted to quit my job. Some how I was working a corporate job while some of my friends were living the ski/surf bum life. I wanted to make some $$$ quick and then cruse into that life in my 30's with a sizable investment account that would ensure I'd I would never be trapped in an office again... I guess that was my youth speaking.

In any case I had been aggressively saving for several years after school, and when the credit markets were at their peak in 06 / 07 I started taking advantage of the easy money. personal & credit card loans -- maxed everything out. Not spending it like a drunken sailor but adding every dime I could to the brokerage account. Most of these funds came into play during the summer of 2008 -- you know after Bear had fallen in the spring, the market had dipped and the correction was over right? Well yeah October and November sucked. Every dime I could find I kept pouring into the account on the way down. Just enough to live on PB&J and the rest going to debt service and adding to the declining portfolio. But what is a guy to do at this point when asset prices just keep getting cheaper? Well that's when you pile margin on top of your personal debt...

Significant negative declining net worth and living on peanuts is stressful for sure, but it was 2009 that really cleaned my clock emotionally. When you see the economy grind to a halt, sales dry up and the layoffs start coming fast and furious even in the defensive industry to which I was employed, you start thinking -- I may have made a mistake here. I guess I never thought I would lose my job, and ultimately I didn't. But what started as a joke among coworkers turned out to be a reality for some and for a great number of my friends who had trouble finding good jobs for the next few years. With regard to the portfolio, I had enough exposure to the debt markets where the magnitude of the equity declines didn't break me. But security selection means nothing when your trying to service this mountain of debt and you lose your job.

So to bring it full circle, I said "moderately levered" I do not consider my experience of a decade ago to be an example of "moderate leverage" :wink:

Snowjob
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Re: That's enough for me in 2019

Post by Snowjob » Sun Mar 31, 2019 10:21 am

market timer wrote:
Sun Mar 31, 2019 9:59 am
Snowjob wrote:
Sun Mar 31, 2019 8:25 am
In another thread you said 2.25M in Tips would have you step away from investing -- your 60% of the way there.
That reply was specific to a question on how much is needed to live on $50K/year for life starting at age 40. Unfortunately, I spend more than that today, and am not opposed to taking on more risk in the right environment.
I don't think behaviorally I could stand being in cash and watching the market climb so I could never do this personally.
It doesn't bother me right now. I think more in terms of valuations and spreads, which are mean reverting. For example, we'll almost surely see a VIX > 30 in the next few years and high-yield credit spreads above 7.5% in the next decade. S&P might be higher or lower than today when these things happen, but I can sit on my hands until then.
Ah, I supposed I confused the two. mea culpa mea maxima culpa :D

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Re: That's enough for me in 2019

Post by bennettg » Sun Mar 31, 2019 3:11 pm

I'm not clever enough to follow a lot of the information in this thread, but I look at investing as if I went to a casino and gambled. Right now, about half of my tax advantaged portfolio (457b, 200K) is earnings. So, I've doubled my money. If I were at a casino, I would probably take my winnings and leave.

While I am not going to retire for about 15yrs, can someone help me figure out the math behind this scenario. If I take my 200K and invest it into something like TIPS, but be more aggressive with my future contributions, what do I lose with gaming interest? Is this the compounding effect? does anyone know a calculator online that can help me? I'm very worried about being greedy at the table. The house always wins if you play long enough, right?

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Re: That's enough for me in 2019

Post by dogagility » Sun Mar 31, 2019 3:42 pm

bennettg wrote:
Sun Mar 31, 2019 3:11 pm
I'm not clever enough to follow a lot of the information in this thread, but I look at investing as if I went to a casino and gambled. Right now, about half of my tax advantaged portfolio (457b, 200K) is earnings. So, I've doubled my money. If I were at a casino, I would probably take my winnings and leave.

While I am not going to retire for about 15yrs, can someone help me figure out the math behind this scenario. If I take my 200K and invest it into something like TIPS, but be more aggressive with my future contributions, what do I lose with gaming interest? Is this the compounding effect? does anyone know a calculator online that can help me? I'm very worried about being greedy at the table. The house always wins if you play long enough, right?
Investing is nothing like gambling.
"The stock market is a device for transferring money from the impatient to the patient" -- Warren Buffett

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Re: That's enough for me in 2019

Post by willthrill81 » Sun Mar 31, 2019 4:11 pm

bennettg wrote:
Sun Mar 31, 2019 3:11 pm
I'm not clever enough to follow a lot of the information in this thread, but I look at investing as if I went to a casino and gambled.
Your starting analogy is greatly flawed.

Admittedly, there are some similarities between gambling and investing, namely that we don't necessarily know what the final outcome will be (although in many instances, we do as long as the government doesn't fail to meet its stated obligations), and we may not even know what the odds of a given outcome are. But it's generally recognized that with gambling, the odds are stacked against you (i.e. if you play long enough, you will lose), but it's generally recognized that the opposite is true of investing (i.e. the expected outcome is positive). This latter point is lost on many novice and non-investors who think that the NYSE is no different than Foxwoods.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: That's enough for me in 2019

Post by gmaynardkrebs » Sun Mar 31, 2019 4:40 pm

bennettg wrote:
Sun Mar 31, 2019 3:11 pm
I'm not clever enough to follow a lot of the information in this thread, but I look at investing as if I went to a casino and gambled. Right now, about half of my tax advantaged portfolio (457b, 200K) is earnings. So, I've doubled my money. If I were at a casino, I would probably take my winnings and leave.

While I am not going to retire for about 15yrs, can someone help me figure out the math behind this scenario. If I take my 200K and invest it into something like TIPS, but be more aggressive with my future contributions, what do I lose with gaming interest? Is this the compounding effect? does anyone know a calculator online that can help me? I'm very worried about being greedy at the table. The house always wins if you play long enough, right?
These are legitimate concerns and excellent questions. Investing wisely is nothing more than the art and science of accommodating two fundamentally conflicting emotions: fear and greed. You've nailed that intuition on your first try. The Boglehead WIKI is the place you should go next. https://www.bogleheads.org/wiki/Main_Page
Best of luck -- and planning. :D

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Re: That's enough for me in 2019

Post by HomerJ » Sun Mar 31, 2019 4:48 pm

bennettg wrote:
Sun Mar 31, 2019 3:11 pm
I'm very worried about being greedy at the table. The house always wins if you play long enough, right?
YOU are the house in this situation when you invest with index funds.

So yes, if you play long enough, you always win (so far).

There's no guarantees that that future will be the same as the past, but even though stocks go up and down, so far, the U.S. stock market has always edged upwards over the long run.

So, if you play long enough, you win.. YOU are the house here.

Now, when you are getting close to retirement, you no longer can guarantee you can play "long-term", so you have to be more careful with your money.

Even the house can lose in the short-term.

Read the wiki and some of the suggested books. Investing is not the same as gambling in a casino.
The J stands for Jay

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Re: That's enough for me in 2019

Post by KlangFool » Sun Mar 31, 2019 5:58 pm

bennettg wrote:
Sun Mar 31, 2019 3:11 pm
I'm not clever enough to follow a lot of the information in this thread, but I look at investing as if I went to a casino and gambled. Right now, about half of my tax advantaged portfolio (457b, 200K) is earnings. So, I've doubled my money. If I were at a casino, I would probably take my winnings and leave.

While I am not going to retire for about 15yrs, can someone help me figure out the math behind this scenario. If I take my 200K and invest it into something like TIPS, but be more aggressive with my future contributions, what do I lose with gaming interest? Is this the compounding effect? does anyone know a calculator online that can help me? I'm very worried about being greedy at the table. The house always wins if you play long enough, right?
bennettg,

1) Why it has to be 100% or nothing? How about 60/40? 50/50?

2) What is your annual expense?

3) What is your annual savings?

4) If the stock market drops 50%, what is the AA that would let you "Sleep Well At Night" (SWAN)?

5) You should not be in a 3 funds portfolio. Put your money in a target retirement fund instead. Then, your money will be taken off the table automatically.

KlangFool

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Re: That's enough for me in 2019

Post by gmaynardkrebs » Sun Mar 31, 2019 6:01 pm

HomerJ wrote:
Sun Mar 31, 2019 4:48 pm
Even the house can lose in the short-term.
As well as in the long run. Long-run risk is not ignorable.

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Re: That's enough for me in 2019

Post by willthrill81 » Sun Mar 31, 2019 8:24 pm

gmaynardkrebs wrote:
Sun Mar 31, 2019 6:01 pm
HomerJ wrote:
Sun Mar 31, 2019 4:48 pm
Even the house can lose in the short-term.
As well as in the long run. Long-run risk is not ignorable.
But as this forum's namesake said,

"Invest we must."
- John Bogle
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: That's enough for me in 2019

Post by dodecahedron » Sun Mar 31, 2019 8:40 pm

willthrill81 wrote:
Sun Mar 31, 2019 8:24 pm
gmaynardkrebs wrote:
Sun Mar 31, 2019 6:01 pm
HomerJ wrote:
Sun Mar 31, 2019 4:48 pm
Even the house can lose in the short-term.
As well as in the long run. Long-run risk is not ignorable.
But as this forum's namesake said,

"Invest we must."
- John Bogle
The use of the pronoun ¨we¨ is curious. By all accounts, Mr. Bogle lived quite modestly and in his final decades had far more wealth than he needed to finance his chosen modest lifestyle. So in fact, it is not clear why he would implicitly include himself by using the pronoun we. He had clearly reached a point in life where it was not true that HE must invest.

And the same may be true of Market Timer as well. He is much younger than Mr. Bogle but it also appears he lives in a much lower cost of living part of the world. Why *must* Market Timer invest?

For myself, similarly, I do not feel that I *must* invest. I do *choose* to invest, though with a very conservative asset allocation. I do not feel I must.

The universal admonition ¨Invest we must¨ strikes me as off the mark. Not every one must invest.
Last edited by dodecahedron on Sun Mar 31, 2019 8:43 pm, edited 1 time in total.

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