I won the game but kept playing

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watchnerd
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Re: I won the game but kept playing

Post by watchnerd » Sun Mar 22, 2020 9:57 am

Starfox wrote:
Sun Mar 22, 2020 9:48 am
Just reinvest, and in 18-24 months you should expect the markets to recover at least back to SP500 3000

Huh.

That's a pretty specific guess.

I have no idea when that might happen.

You should buy futures.
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lostdog
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Re: I won the game but kept playing

Post by lostdog » Sun Mar 22, 2020 10:04 am

MnD wrote:
Sun Mar 22, 2020 9:26 am
$2.2M is the new $2.8M.
And given single and joint life expectancies, you "game" may have 40 or more years to run.

Nothing feels better than having stayed the course during a crash and watching your portfolio rebound while those that bailed and locked in their losses wring their hands day after day, week after week wondering if its safe to get back in yet. As the market gets higher and higher the perceived risk for those on the sidelines just magnifies. That's why so many that bailed in 2008/09 never got back in. Or they got back in a little bit which is almost as bad. Or they waited years to get back in to equity just in time for another huge route while not having benefited from the recovery.

A really good investment plan doesn't feel good in the middle of a market crash while those in low return "safe" plans sail through.
A really good career plan doesn't feel good when you suffer setbacks and you see folks in boring low-risk low-advancement jobs carrying on.
A really good physical conditioning plan doesn't feel good when you are hurt/cold/tired and the folks that never go beyond walking 30 minutes on the treadmill seem just fine.
+1000 Well said.
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SpartanFan
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Re: I won the game but kept playing

Post by SpartanFan » Sun Mar 22, 2020 10:16 am

Personally, with a pretty conservative 40/60 portfolio we are down 17.9% from our high on Feb 19. Tough to stomach but holding still.

Primary holdings include VBTLX and VTI
"There's a crack in everything, that's how the light gets in" - Leonard Cohen (RIP)

Starfox
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Re: I won the game but kept playing

Post by Starfox » Sun Mar 22, 2020 10:48 am

watchnerd wrote:
Sun Mar 22, 2020 9:57 am
Starfox wrote:
Sun Mar 22, 2020 9:48 am
Just reinvest, and in 18-24 months you should expect the markets to recover at least back to SP500 3000

Huh.

That's a pretty specific guess.

I have no idea when that might happen.

You should buy futures.
The point is if he has been buying for years, or plans on buying monthly while he is working now, i.e. at SP500 2300, he can sell stocks in the individuals 2025-2027 retirement year he either is buying now, or bought 5+ years ago at SP500 2000, and anything above now is not selling at a loss from initial purchase. It may be a loss from all time highs of SP500 3400, it's all how the sell is framed. in 2022, the SP500 won't be between 0-2000, it will be higher. The world can get past this virus and move on bruised but stronger.

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watchnerd
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Re: I won the game but kept playing

Post by watchnerd » Sun Mar 22, 2020 2:48 pm

Starfox wrote:
Sun Mar 22, 2020 10:48 am


The point is if he has been buying for years, or plans on buying monthly while he is working now, i.e. at SP500 2300, he can sell stocks in the individuals 2025-2027 retirement year he either is buying now, or bought 5+ years ago at SP500 2000, and anything above now is not selling at a loss from initial purchase. It may be a loss from all time highs of SP500 3400, it's all how the sell is framed. in 2022, the SP500 won't be between 0-2000, it will be higher. The world can get past this virus and move on bruised but stronger.
Maybe.

Or we could end up with another lost decade where stocks go sideways for a long time.

I'm making no predictions.

Still 70% stocks in case good happens, but only 35% of our net worth if it doesn't.
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

mojorisin
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Re: I won the game but kept playing

Post by mojorisin » Sun Mar 22, 2020 8:48 pm

Starfox: when you say "30x savings" what does that number represent? savings = 1 years spending x 30?

Starfox
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Re: I won the game but kept playing

Post by Starfox » Mon Mar 23, 2020 9:35 am

mojorisin wrote:
Sun Mar 22, 2020 8:48 pm
Starfox: when you say "30x savings" what does that number represent? savings = 1 years spending x 30?

yes, 30x savings = 1 years spending x 30. Current portfolio balance divided by our annual spending which includes all discretionary items like buying new cars and going on annual vacations = 30x today. A month ago it was approx. 40x years of spending which mathematically makes sense, since our portfolio is down 27% from all time highs right now, a month ago the portfolio was $26M, today is $19M.

I have been buying large amounts on the dips, $2.5m at -10%, $2.5m @ -20%, and $2m @ -30%. All can be categorized as bad buys in the short-term. Right now I am 95% stocks and 5% bonds, with $18M in SP500 fund, and $1M in cash/money market fund.

The cash is enough to last 18-24 months without spending dividends or selling stock shares. The plan is to sell those dip purchases I made, when we get back to SP500 of 3400, to put me back to 70% stocks and 30% short term bonds (1-2 year duration).

In the grand scheme of things it doesn't make a big difference and I have updated my future plans to not buy at -10% and -20%, but to have the first dip purchase at -25% and second at -35%. Some tweaking that I think will help over the next 40-50 years.

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Re: I won the game but kept playing

Post by SpiritDitch » Sat Mar 28, 2020 9:24 pm

I feel similarly to the OP: I forgot to quit playing.

My portfolio reaching 2M a few months ago should have ringed a bell.
I'm 32, but I've been mulling over scaling back work in the next year or two. I saw my portfolio as a way to buy me time for some of my passions. I already had more than I ever imagined was in my future. It would have been nice to "lock that in" in safer assets, and just put future contributions in stocks.

I posted here last summer about shifting my AA (I was 80/20). I got some good tips but only executed the easy ones: directed new contributions and dividends to Muni bonds, except in my retirement accounts. I ended up at 75/25 in February.
I could have exchanged my tax-sheltered funds, but it felt weird to slow growth in retirement accounts.
I could have taken some gains in my taxable account, but I wanted to avoid higher taxes while full-time employed (some back-of-the envelope math now shows it wouldn't have been too crazy).

Regardless, I likely would have rebalanced to around 60/40. I would have still felt this quite a bit.
I'm now down ~400k. It could be worse, and it might get worse. I expect wild swings in the coming months, and I don't feel too excited about the possible scenarios: if the market recovers over a few years, it could be an opportunity to keep investing aggressively, but I value freedom to exit early more now; if it takes much longer, I might have to reconsider some of my plans/hopes.

I told myself I'm flexible, I could work through a recession, and that's true. But I didn't appreciate to what extent my peace of mind was linked to thinking "I can walk whenever I want".
I'm a passive investor, not a market timer, but this tells me my plan needed to have a bit more than an AA and a vague idea of starting to shift it. It should have some "if this, then that" scenarios based on net worth milestones, for instance.

At least I'm happy I kept my tax-inefficient auto-rebalancing funds, so I don't need to do anything right now.

I also realize this crisis is causing much more serious suffering than the hit to our portfolios. It's definitely a luxury to be worrying about this.

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Re: I won the game but kept playing

Post by justsomeguy2018 » Sat Mar 28, 2020 9:37 pm

mrspock wrote:
Sat Mar 21, 2020 11:26 am
Rat_Race wrote:
Sat Mar 21, 2020 11:22 am
mrspock wrote:
Sat Mar 21, 2020 11:08 am
mrwalken wrote:
Sat Mar 21, 2020 11:05 am
If you are close to 100% stocks and over 50, I would be concerned that your 2M could continue dropping to 1M or worse.

Of course, selling low sucks. But do you have to go all the way down with the ship?

Age in bonds/cash is a good rule imo.
$1M? You seriously think -67% is in the cards? If that happens I'll sell my house and buy equities. Nobody is dumb enough to sell equities at those valuations over this... not even Wall Street. You are thinking the complete opposite of how you should be.

As for bonds. Take a look over on the 200 "My bond fund tanked" threads on here...they are doing better yes, but -10% has been pretty eye opening to many, including myself.
Don't be so sure of yourself. This could be worse than the great depression. No one really knows.
Nobody really knows anything, but you can make some reasonable guesses based on the facts at hand. I find it unreasonable to be postulating at such an outcome based on what we know now. According to the WJS GDP will contract by some 25% in Q2 -- unprecedented, worse than 2008. But mark my words, the rebound will likely be just as intense. It seems pretty obvious to me what 350M people "sheltering in place" does to your economy, and equally obvious what it does when they are all allowed to go back to their lives.
The problem with this thinking is you don't know when the rebound will be because you don't know the path of the virus - there is no guarantee we get this under control, and even if it does peter out, no guarantee there aren't periodic waves or resurgences of it. This could be a year or more shutdown for all we know. Could easily lose 67%, even 80% or more. The economic destruction is real.

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mrspock
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Re: I won the game but kept playing

Post by mrspock » Sat Mar 28, 2020 10:06 pm

justsomeguy2018 wrote:
Sat Mar 28, 2020 9:37 pm
....

The problem with this thinking is you don't know when the rebound will be because you don't know the path of the virus - there is no guarantee we get this under control, and even if it does peter out, no guarantee there aren't periodic waves or resurgences of it. This could be a year or more shutdown for all we know. Could easily lose 67%, even 80% or more. The economic destruction is real.
There is exactly a 0% chance this will be a 1 year shutdown. 0%. Let that sink in. Take off the tin foil hat. And yes, we know the trend because there's this thing called math, and science. This isn't our first pandemic rodeo.
Last edited by mrspock on Sat Mar 28, 2020 10:28 pm, edited 1 time in total.

New Providence
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Re: I won the game but kept playing

Post by New Providence » Sat Mar 28, 2020 10:11 pm

mrspock wrote:
Sat Mar 28, 2020 10:06 pm
justsomeguy2018 wrote:
Sat Mar 28, 2020 9:37 pm
....

The problem with this thinking is you don't know when the rebound will be because you don't know the path of the virus - there is no guarantee we get this under control, and even if it does peter out, no guarantee there aren't periodic waves or resurgences of it. This could be a year or more shutdown for all we know. Could easily lose 67%, even 80% or more. The economic destruction is real.
There is exactly a 0% change this will be a 1 year shutdown. 0%. Let that sink in. Take off the tin foil hat. And yes, we know the trend because there's this thing called math, and science. This isn't our first pandemic rodeo.
0%? Uhm, not sure about that.

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Re: I won the game but kept playing

Post by Unladen_Swallow » Sat Mar 28, 2020 11:02 pm

justsomeguy2018 wrote:
Sat Mar 28, 2020 9:37 pm

The problem with this thinking is you don't know when the rebound will be because you don't know the path of the virus - there is no guarantee we get this under control, and even if it does peter out, no guarantee there aren't periodic waves or resurgences of it. This could be a year or more shutdown for all we know. Could easily lose 67%, even 80% or more. The economic destruction is real.
Some people like to always see the worst. If something is going well, they think the worst MUST be around the corner.
If something is going poorly, they say "see, it could get worse".

Then there are the optimists. When things are well, they enjoy it. When things are bad, they trust that we overcome and stay calm. They spend their days in positivity and hope.

For both these sets of people, the result could be the same. Either thingsbturn around, or chaos erupts. But the 2nd group has spent their days happier than the first.

I am firmly in the 2nd group.
"I think it's much more interesting to live not knowing than to have answers which might be wrong." - Richard Feynman

justsomeguy2018
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Re: I won the game but kept playing

Post by justsomeguy2018 » Sat Mar 28, 2020 11:42 pm

Unladen_Swallow wrote:
Sat Mar 28, 2020 11:02 pm
justsomeguy2018 wrote:
Sat Mar 28, 2020 9:37 pm

The problem with this thinking is you don't know when the rebound will be because you don't know the path of the virus - there is no guarantee we get this under control, and even if it does peter out, no guarantee there aren't periodic waves or resurgences of it. This could be a year or more shutdown for all we know. Could easily lose 67%, even 80% or more. The economic destruction is real.
Some people like to always see the worst. If something is going well, they think the worst MUST be around the corner.
If something is going poorly, they say "see, it could get worse".

Then there are the optimists. When things are well, they enjoy it. When things are bad, they trust that we overcome and stay calm. They spend their days in positivity and hope.

For both these sets of people, the result could be the same. Either thingsbturn around, or chaos erupts. But the 2nd group has spent their days happier than the first.

I am firmly in the 2nd group.
But if you expect the worst, you're never disappointed 8-)

Ashley
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Re: I won the game but kept playing

Post by Ashley » Sat Mar 28, 2020 11:43 pm

We are in a similiar boat. But worse in one way. In addition to our main portfolio losses (-40%, but now -30% from the ATH), we had 3 million in intermediate sized oil and gas firms, now worth about 250k.

I feel like throwing up several times a day. These companies cannot survive more than 6-12 months at the current prices and there is a real possibility that those losses will be permanent.

I have read all the books from Malkiel to Bernstein to Zweig to Bogle. I have read these forums for more than 12 years. I KNEW better.

I feel like a complete idiot. :(

justsomeguy2018
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Re: I won the game but kept playing

Post by justsomeguy2018 » Sat Mar 28, 2020 11:51 pm

Ashley wrote:
Sat Mar 28, 2020 11:43 pm
We are in a similiar boat. But worse in one way. In addition to our main portfolio losses (-40%, but now -30% from the ATH), we had 3 million in intermediate sized oil and gas firms, now worth about 250k.

I feel like throwing up several times a day. These companies cannot survive more than 6-12 months at the current prices and there is a real possibility that those losses will be permanent.

I have read all the books from Malkiel to Bernstein to Zweig to Bogle. I have read these forums for more than 12 years. I KNEW better.

I feel like a complete idiot. :(
That is a real bummer. I hope they recover.

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watchnerd
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Re: I won the game but kept playing

Post by watchnerd » Sat Mar 28, 2020 11:52 pm

Ashley wrote:
Sat Mar 28, 2020 11:43 pm
We are in a similiar boat. But worse in one way. In addition to our main portfolio losses (-40%, but now -30% from the ATH), we had 3 million in intermediate sized oil and gas firms, now worth about 250k.

I feel like throwing up several times a day. These companies cannot survive more than 6-12 months at the current prices and there is a real possibility that those losses will be permanent.

I have read all the books from Malkiel to Bernstein to Zweig to Bogle. I have read these forums for more than 12 years. I KNEW better.

I feel like a complete idiot. :(
Wow.

Sweet Christmas.

What lead you to put so much into one sector??
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smectym
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Re: I won the game but kept playing

Post by smectym » Sat Mar 28, 2020 11:59 pm

mrwalken wrote:
Sat Mar 21, 2020 11:25 am
mrspock wrote:
Sat Mar 21, 2020 11:08 am
mrwalken wrote:
Sat Mar 21, 2020 11:05 am
If you are close to 100% stocks and over 50, I would be concerned that your 2M could continue dropping to 1M or worse.

Of course, selling low sucks. But do you have to go all the way down with the ship?

Age in bonds/cash is a good rule imo.
$1M? You seriously think -67% is in the cards? If that happens I'll sell my house and buy equities. Nobody is dumb enough to sell equities at those valuations over this... not even Wall Street. You are thinking the complete opposite of how you should be.

As for bonds. Take a look over on the 200 "My bond fund tanked" threads on here...they are doing better yes, but -10% has been pretty eye opening to many, including myself.
I don't think -67% is likely but it's possible.

Let's say somebody is 50 yrs old with a 3M portfolio before all of this. At 50/50, even a stock catastrophe preserves 1.5M which anybody can survive on for a long time. At 100/0, there is a possibility, however small, that you could end up WAY below 1.5M and in a bad spot. That worse case scenario is looking more likely by the day.

I often see the risk of holding too high a percentage in equities described here as the feeling that you won't be able to stomach the drop and will end up selling at the bottom. That seems wrong to me.

The risk of holding too high a percentage in equities is that you will lose more than you can afford to lose and equities will not recover for a LONG time.
To me, managing money, if I have $5M and I “manage” it down to $3M, I don’t tell myself that no one should really care, because $3 million is still a lot of money, we can still live on $3M etc. Instead, I’d say, speaking metaphorically of course, “somebody please take me out behind the barn and shoot me.”

Capital preservation is a very important investment objective. The first principle of investing is not “stay the course,” but rather, “Don’t lose money,” i.e., please don’t “manage” things to the point of a potentially permanent loss of a significant chunk of capital.

justsomeguy2018
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Re: I won the game but kept playing

Post by justsomeguy2018 » Sun Mar 29, 2020 12:05 am

SpiritDitch wrote:
Sat Mar 28, 2020 9:24 pm
I feel similarly to the OP: I forgot to quit playing.

My portfolio reaching 2M a few months ago should have ringed a bell.
I'm 32, but I've been mulling over scaling back work in the next year or two. I saw my portfolio as a way to buy me time for some of my passions. I already had more than I ever imagined was in my future. It would have been nice to "lock that in" in safer assets, and just put future contributions in stocks.

I posted here last summer about shifting my AA (I was 80/20). I got some good tips but only executed the easy ones: directed new contributions and dividends to Muni bonds, except in my retirement accounts. I ended up at 75/25 in February.
I could have exchanged my tax-sheltered funds, but it felt weird to slow growth in retirement accounts.
I could have taken some gains in my taxable account, but I wanted to avoid higher taxes while full-time employed (some back-of-the envelope math now shows it wouldn't have been too crazy).

Regardless, I likely would have rebalanced to around 60/40. I would have still felt this quite a bit.
I'm now down ~400k. It could be worse, and it might get worse. I expect wild swings in the coming months, and I don't feel too excited about the possible scenarios: if the market recovers over a few years, it could be an opportunity to keep investing aggressively, but I value freedom to exit early more now; if it takes much longer, I might have to reconsider some of my plans/hopes.

I told myself I'm flexible, I could work through a recession, and that's true. But I didn't appreciate to what extent my peace of mind was linked to thinking "I can walk whenever I want".
I'm a passive investor, not a market timer, but this tells me my plan needed to have a bit more than an AA and a vague idea of starting to shift it. It should have some "if this, then that" scenarios based on net worth milestones, for instance.

At least I'm happy I kept my tax-inefficient auto-rebalancing funds, so I don't need to do anything right now.

I also realize this crisis is causing much more serious suffering than the hit to our portfolios. It's definitely a luxury to be worrying about this.
You are only 32, 75/25 seems pretty reasonable, you still should have 20+ years to recover.

That being said if this recovery ever happens I may switch to the age in bonds minus 10 rule.

Ashley
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Re: I won the game but kept playing

Post by Ashley » Sun Mar 29, 2020 12:06 am

Wow.

Sweet Christmas.

What lead you to put so much into one sector??

Well it started slowly. We live in an O&G city and have many friends in the industry. A very close friend was coming off his second big sale of a company to a larger competitor in 2014 resulting in outsized gains. He was doing a third start up and asked us if we wanted to invest on the founders list. As many of you know, it's nice to get in on the founders list as the subsequent cash raise is usually at a higher price and sets up for good gains when the company is sold in 3-5 years. So we put in $300k and within a few weeks we were already up 30% and feeling good about the prospects.

Then the first price war came in 2015 and resource prices plummeted. By Feb 2016 the price of oil was $26 and everyone in our city thought that publicly listed oil companies were the gift of a lifetime at the market prices. So we nibbled on some well respected names. Things recovered and tanked over and over again for the next three years and we kept adding thinking that the recovery would reward us handsomely. We were nervous about our level of exposure as recently as January, but not smart enough to do anything about it. And then this new price war came out of left field.

It's embarrassing to talk about, honestly. I feel much shame. So many hard-worked hours went into earning those dollars. So much time away from my family.

We are still blessed in our financial position, of course, but a loss is a loss, and this is a giant loss that has a high probability of being permanent. In fact we would be lucky to see it recover to only a 70% loss at this point.

I post in hopes that others might be able to learn from this awful mistake.

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wander
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Re: I won the game but kept playing

Post by wander » Sun Mar 29, 2020 1:00 am

If you are still playing, you haven't won the game yet. The number may show you have won the game, however.

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Re: I won the game but kept playing

Post by Unladen_Swallow » Sun Mar 29, 2020 1:06 am

justsomeguy2018 wrote:
Sat Mar 28, 2020 11:42 pm

But if you expect the worst, you're never disappointed 8-)
:D That I agree with you.

100% misery, but 0% disappointment.
"I think it's much more interesting to live not knowing than to have answers which might be wrong." - Richard Feynman

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Re: I won the game but kept playing

Post by Dale_G » Sun Mar 29, 2020 1:13 am

I won the game before I retired in 2001 (three weeks after 9/11). Things looked pretty bleak at the time, but I kept playing. No regrets.

I'll continue to play, and slowly buy as the market eventually works lower to reflect the real value of companies after the damage is more clearly recognized. I am actually a little surprised, but I am not dismayed by 7 digit losses. It is what is it, and I bear the responsibility. There is no room for cudda, shoulda, woulda.

Dale
Volatility is my friend

Ari
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Re: I won the game but kept playing

Post by Ari » Sun Mar 29, 2020 3:57 am

SpiritDitch wrote:
Sat Mar 28, 2020 9:24 pm
I feel similarly to the OP: I forgot to quit playing.

My portfolio reaching 2M a few months ago should have ringed a bell.
I'm 32, but I've been mulling over scaling back work in the next year or two.
Hang in there! I'm 36 and only have about a tenth of your assets, but have also been thinking about scaling back at work, as I'm nearing the point where I could live on 4%. (I live in a country more or less as expensive the US, but have frugal habits.) A bit further from that point now, of course, and I'll make sure to hang on to my income until this bear is firmly behind us.

However, if you can live on less than 100% of your income, you could scale back work without having to dip into your portfolio, as long as your income is less than your expenses. So this bear might not need to stop you from scaling back, just from retiring completely. If you lower your income, sure, you might not make full use of this "buying opportunity", but you would still not damage your portfolio, just let it recover in its own time.
All in, all the time.

mmcmonster
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Re: I won the game but kept playing

Post by mmcmonster » Sun Mar 29, 2020 5:56 am

Flextruck wrote:
Sat Mar 21, 2020 10:47 am
There should be a much greater emphasis on an "Exit Strategy" as far as I'm concerned. You read these boards and 99% of strategy is centered around the do's and don'ts of accumulation.

An exit strategy needs to be in place for those that have won the game. How do you exit without triggering massive tax implications?? What age is considered optimal to exit?? When you exit, what do you exit to??

These are pertinent questions that need to have answers.
Good point. There should be more questions on the board about this.

I personally am ~10 years to retiring. I'm gliding myself towards an exit of 60/40. Of that 40 percent, I'm always buying muni and treasury bond funds. Maybe I'll add some TIPS or something in the future. I'm actually quite happy with how my assets are doing so far through this crisis.

But, I'm pretty sure the finance side of this crisis is just warming up. :|

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burt
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Re: I won the game but kept playing

Post by burt » Sun Mar 29, 2020 6:02 am

smectym wrote:
Sat Mar 28, 2020 11:59 pm
mrwalken wrote:
Sat Mar 21, 2020 11:25 am
mrspock wrote:
Sat Mar 21, 2020 11:08 am
mrwalken wrote:
Sat Mar 21, 2020 11:05 am
If you are close to 100% stocks and over 50, I would be concerned that your 2M could continue dropping to 1M or worse.

Of course, selling low sucks. But do you have to go all the way down with the ship?

Age in bonds/cash is a good rule imo.
$1M? You seriously think -67% is in the cards? If that happens I'll sell my house and buy equities. Nobody is dumb enough to sell equities at those valuations over this... not even Wall Street. You are thinking the complete opposite of how you should be.

As for bonds. Take a look over on the 200 "My bond fund tanked" threads on here...they are doing better yes, but -10% has been pretty eye opening to many, including myself.
I don't think -67% is likely but it's possible.

Let's say somebody is 50 yrs old with a 3M portfolio before all of this. At 50/50, even a stock catastrophe preserves 1.5M which anybody can survive on for a long time. At 100/0, there is a possibility, however small, that you could end up WAY below 1.5M and in a bad spot. That worse case scenario is looking more likely by the day.

I often see the risk of holding too high a percentage in equities described here as the feeling that you won't be able to stomach the drop and will end up selling at the bottom. That seems wrong to me.

The risk of holding too high a percentage in equities is that you will lose more than you can afford to lose and equities will not recover for a LONG time.
To me, managing money, if I have $5M and I “manage” it down to $3M, I don’t tell myself that no one should really care, because $3 million is still a lot of money, we can still live on $3M etc. Instead, I’d say, speaking metaphorically of course, “somebody please take me out behind the barn and shoot me.”

Capital preservation is a very important investment objective. The first principle of investing is not “stay the course,” but rather, “Don’t lose money,” i.e., please don’t “manage” things to the point of a potentially permanent loss of a significant chunk of capital.
Regarding "Don't lose money"
Reminds me of the Zvi Bodie video's.

https://www.youtube.com/watch?v=Yfta3z6I7Xs

Leesbro63
Posts: 6576
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Re: I won the game but kept playing

Post by Leesbro63 » Sun Mar 29, 2020 7:25 am

burt wrote:
Sun Mar 29, 2020 6:02 am
smectym wrote:
Sat Mar 28, 2020 11:59 pm
mrwalken wrote:
Sat Mar 21, 2020 11:25 am
mrspock wrote:
Sat Mar 21, 2020 11:08 am
mrwalken wrote:
Sat Mar 21, 2020 11:05 am
If you are close to 100% stocks and over 50, I would be concerned that your 2M could continue dropping to 1M or worse.

Of course, selling low sucks. But do you have to go all the way down with the ship?

Age in bonds/cash is a good rule imo.
$1M? You seriously think -67% is in the cards? If that happens I'll sell my house and buy equities. Nobody is dumb enough to sell equities at those valuations over this... not even Wall Street. You are thinking the complete opposite of how you should be.

As for bonds. Take a look over on the 200 "My bond fund tanked" threads on here...they are doing better yes, but -10% has been pretty eye opening to many, including myself.
I don't think -67% is likely but it's possible.

Let's say somebody is 50 yrs old with a 3M portfolio before all of this. At 50/50, even a stock catastrophe preserves 1.5M which anybody can survive on for a long time. At 100/0, there is a possibility, however small, that you could end up WAY below 1.5M and in a bad spot. That worse case scenario is looking more likely by the day.

I often see the risk of holding too high a percentage in equities described here as the feeling that you won't be able to stomach the drop and will end up selling at the bottom. That seems wrong to me.

The risk of holding too high a percentage in equities is that you will lose more than you can afford to lose and equities will not recover for a LONG time.
To me, managing money, if I have $5M and I “manage” it down to $3M, I don’t tell myself that no one should really care, because $3 million is still a lot of money, we can still live on $3M etc. Instead, I’d say, speaking metaphorically of course, “somebody please take me out behind the barn and shoot me.”

Capital preservation is a very important investment objective. The first principle of investing is not “stay the course,” but rather, “Don’t lose money,” i.e., please don’t “manage” things to the point of a potentially permanent loss of a significant chunk of capital.
Regarding "Don't lose money"
Reminds me of the Zvi Bodie video's.

https://www.youtube.com/watch?v=Yfta3z6I7Xs
But if you didn’t take significant equity risk, you probably wouldn’t have accumulated the $5M to begin with. Draw dorms from $5M to $3M are hugely painful. But the ability to tolerate them are pretty much required for efficient long term accumulation and even for long term withdrawal phase.

Leesbro63
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Re: I won the game but kept playing

Post by Leesbro63 » Sun Mar 29, 2020 7:29 am

Dale_G wrote:
Sun Mar 29, 2020 1:13 am
I won the game before I retired in 2001 (three weeks after 9/11). Things looked pretty bleak at the time, but I kept playing. No regrets.

I'll continue to play, and slowly buy as the market eventually works lower to reflect the real value of companies after the damage is more clearly recognized. I am actually a little surprised, but I am not dismayed by 7 digit losses. It is what is it, and I bear the responsibility. There is no room for cudda, shoulda, woulda.

Dale
Will you risk selling “safe” fixed income investments to buy more risk (stock) assets to rebalance to your target allocation? Of just add new money to stocks as it becomes available? Will you take the Pascal’s Wager of flushing good money after bad?

keelerjr12
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Re: I won the game but kept playing

Post by keelerjr12 » Sun Mar 29, 2020 7:34 am

I have to ask, how are guys getting such large portfolios at such young ages? I mean 10 years out of college, you’d still have to invest $70k a year to come close to $1M. That is what you’d start out saving right out of college. $2M? That’s $140k a year!

So you either have exceptionally high incomes or ??? I’m just curious to figure out how I can do better. This is coming from someone who saves >50% of my wife’s and my income (and we both make good money).

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sperry8
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Re: I won the game but kept playing

Post by sperry8 » Sun Mar 29, 2020 9:51 am

PoultryMan wrote:
Sat Mar 21, 2020 10:26 am
First off prayers and best wishes to all those physically or financially traumatized by our current crisis.

Bill Bernstein’s words keep me up at night.

I am beating myself up as I had a portfolio of 3m, now almost 2 M. I won the game, but kept playing due to what I can only say was greed in hindsight.

I know others have worse problems right now, but I find it amazing I was so stupid but to fall into the greed when markets were exceptionally high, and now find it emotionally impossible to be greedy as others are fearful.

I guess I am saying I thought I learned my lesson in 2008 being 100% equities. Now I’m learning an even harder lesson.

Be safe all and have HOPE, we will get through this.
You didn't lose yet. The game is still being played. That is, you're alive and I assume, still have quite a time horizon left. Are you currently living off this $2mm? Dividends or interest income - or do you sell a portion of it to live? If you live off some savings (or divs/int inc) then you haven't lost anything at all (except on paper). If you do need to sell a portion - then you only are losing 1/3 to 1/4 of the portion you are selling - until stocks come back up on paper. You did not lose 33% as you do not need all the money tomorrow.

So for example, if you live on $100k per year... you lost $25k-$33k (depending on when you sell and what market prices are at when you do). Let's assume this takes 5 long years to get back to even. So you lost $125k-$150k. Even at $150k you lost 5% of your total. Lost of course means that you had to withdraw more than you would have previously at this new lower #. This assumes you cannot tighten your belt during the ensuing 5 years too. Now of course, this downturn may not last 5 years... perhaps we get even at 3 or 4 years. Perhaps you can lower your spend during the downturn. And of course, you didn't really even lose 5%. You lost 5% from the top. How much are you already up (ie., how much did you invest)? My guess is that you are up overall. So instead of being up 20% since inception, perhaps you're up 15%. It is a fallacy to look at losses from the top and to look at the total % loss from the top when you don't need the money tomorrow.
BH contest results: 2019: #233 of 645 | 18: #150 of 493 | 17: #516 of 647 | 16: #121 of 610 | 15: #18 of 552 | 14: #225 of 503 | 13: #383 of 433 | 12: #366 of 410 | 11: #113 of 369 | 10: #53 of 282

ScroogeMcDuck
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Re: I won the game but kept playing

Post by ScroogeMcDuck » Sun Mar 29, 2020 10:31 am

keelerjr12 wrote:
Sun Mar 29, 2020 7:34 am
I have to ask, how are guys getting such large portfolios at such young ages? I mean 10 years out of college, you’d still have to invest $70k a year to come close to $1M. That is what you’d start out saving right out of college. $2M? That’s $140k a year!

So you either have exceptionally high incomes or ??? I’m just curious to figure out how I can do better. This is coming from someone who saves >50% of my wife’s and my income (and we both make good money).
Unless inherited, it's some combination of high income, high savings, and high returns. We're mid-30s, have been investing for 10 years, and our portfolio peaked last month at $2.1 million (it's about $1.6 million now). Our household income has ranged from $160k to $300k, so not super high, but our post tax savings rate has ranged from 60-80%.

Nowizard
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Re: I won the game but kept playing

Post by Nowizard » Sun Mar 29, 2020 11:54 am

It has been difficult for us to move from accumulation to preservation as well, another way of saying that we have also been taking more risk than required. That was a decision we both made, it was not one typically suggested, so from the vantage point of today, it was an error. They are common in investing, and you stukk have sufficient funds for yourselves from your post. Sounds like the "loss" is primarily all or a portion of the amount you were accumulating for your heirs.
Ultimately, we make our choices, there are no guarantees, and we don't have to be right but have, hopefully, asked ourselves if we can accept the consequences of decisions we make. I suspect if you won the game some time ago and have been at the riskier level for several years, you might find some balm in back-testing. A comparison of your assets with actual and hypothetical allocations from the time you first won the game might very well show that you still have more assets now than you would have had if you become conservative earlier.

Tim

Ari
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Re: I won the game but kept playing

Post by Ari » Sun Mar 29, 2020 2:24 pm

ScroogeMcDuck wrote:
Sun Mar 29, 2020 10:31 am
keelerjr12 wrote:
Sun Mar 29, 2020 7:34 am
I have to ask, how are guys getting such large portfolios at such young ages? I mean 10 years out of college, you’d still have to invest $70k a year to come close to $1M. That is what you’d start out saving right out of college. $2M? That’s $140k a year!

So you either have exceptionally high incomes or ??? I’m just curious to figure out how I can do better. This is coming from someone who saves >50% of my wife’s and my income (and we both make good money).
Unless inherited, it's some combination of high income, high savings, and high returns. We're mid-30s, have been investing for 10 years, and our portfolio peaked last month at $2.1 million (it's about $1.6 million now). Our household income has ranged from $160k to $300k, so not super high, but our post tax savings rate has ranged from 60-80%.
It's amazing how I can feel so wealthy whenever I talk about investments with friends and colleagues and so poor when reading the Bogleheads forum. :mrgreen: I remember when my friend almost apologetically called me "rich", and added, "I'm sorry, but if you have 100k USD, you're rich. No ifs and buts about it."
All in, all the time.

Leesbro63
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Re: I won the game but kept playing

Post by Leesbro63 » Sun Mar 29, 2020 3:06 pm

Off topic but fir a little comic relief: the title of this thread makes me think of the song “I fought the law and the law won”

eldinerocheapo
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Re: I won the game but kept playing

Post by eldinerocheapo » Sun Mar 29, 2020 3:06 pm

Nearly everyone here has taken it in the shorts, big time.

We're 60/40 but still have losses nearing $500k. To compensate, we're only using the TIRA to offset any expenses over DW's earnings of $2.5k per month. This amount is around $1k per month until things improve, and can be matched by savings for the next 10 years. SS is an option in the coming months.

We're trying to draw as planned and enjoy life while doing the least amount of damage to the overall nest egg.
"Do, or do not." Yoda

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