WaPo: Many Investors Have Sat Out Rally

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superlight
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Post by superlight » Fri Oct 16, 2009 8:45 am

Wagnerjb wrote:Sadly, the investors who cannot control their emotions (or don't have the right AA for themselves) are the ones who suffer the underperformance. The disciplined investors who stuck with an appropriate AA and rebalanced during the market lows are doing much better..
I really like your comment, Wagner, and I agree with it all ... except I would change the word "underperformance" to "loss."

To my mind underperformance is too much a comparison with the other guy, a guy who may be carrying a lot more risk than you. He may just have been lucky that his particular exposure didn't come up.

If I can manage a steady 8% (assuming 3% inflation) I'm not going to sweat that someone else does 10% on average, and particularly not that somebody does 30% on one YTD.
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Post by ddb » Fri Oct 16, 2009 8:48 am

superlight wrote:
Wagnerjb wrote:Sadly, the investors who cannot control their emotions (or don't have the right AA for themselves) are the ones who suffer the underperformance. The disciplined investors who stuck with an appropriate AA and rebalanced during the market lows are doing much better..
I really like your comment, Wagner, and I agree with it all ... except I would change the word "underperformance" to "loss."

To my mind underperformance is too much a comparison with the other guy, a guy who may be carrying a lot more risk than you. He may just have been lucky that his particular exposure didn't come up.

If I can manage a steady 8% (assuming 3% inflation) I'm not going to sweat that someone else does 10% on average, and particularly not that somebody does 30% on one YTD.
I think the word "underperformance" used by Andy referred to performance relative to the risk that the investors are taking, and is therefore an appropriate word; it's not a measure of returns relative to other investors.

- DDB
"We have to encourage a return to traditional moral values. Most importantly, we have to promote general social concern, and less materialism in young people." - PB

superlight
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Post by superlight » Fri Oct 16, 2009 8:52 am

ddb wrote:I think the word "underperformance" used by Andy referred to performance relative to the risk that the investors are taking, and is therefore an appropriate word; it's not a measure of returns relative to other investors.
OK, that's fine then. FWIW, I think when the investment-broker-cnbc complex winds up though, they mean something else.

(ie. "top funds")
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bob90245
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Post by bob90245 » Fri Oct 16, 2009 10:49 am

letsgobobby wrote:
FrugalInvestor wrote:I think the Boglehead method is boring to most people and viewed as an admittance that they aren't any smarter than the next guy. A timing approach, on the other hand, is a declaration that one is smarter than most other people. Who wants to be average when they can be in a position to boast about their accomplishments?
hey, nearly half of us are above average.
Oh, if only that were true. The research on investor dollar-weighted returns does not paint a pretty picture, unfortunately. Investors as a group systematically pour money into rising markets (the most near market peaks) and then pull their money out during falling markets (the most near market bottoms). The result is lower dollar-weighted returns on investor money versus how the funds they invested actually performend had investors simply bought and held.
Ignore the market noise. Keep to your rebalancing schedule whether that is semi-annual, annual or trigger bands.

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Post by unclemick » Fri Oct 16, 2009 5:36 pm

bob90245 wrote:
letsgobobby wrote:
FrugalInvestor wrote:I think the Boglehead method is boring to most people and viewed as an admittance that they aren't any smarter than the next guy. A timing approach, on the other hand, is a declaration that one is smarter than most other people. Who wants to be average when they can be in a position to boast about their accomplishments?
hey, nearly half of us are above average.
Oh, if only that were true. The research on investor dollar-weighted returns does not paint a pretty picture, unfortunately. Investors as a group systematically pour money into rising markets (the most near market peaks) and then pull their money out during falling markets (the most near market bottoms). The result is lower dollar-weighted returns on investor money versus how the funds they invested actually performend had investors simply bought and held.
I wonder what an original "Index Funds are un-American' poster would sell for at an art auction?

heh heh heh - :wink:

letsgobobby
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Post by letsgobobby » Fri Oct 16, 2009 11:56 pm

bob90245 wrote:
letsgobobby wrote:
FrugalInvestor wrote:I think the Boglehead method is boring to most people and viewed as an admittance that they aren't any smarter than the next guy. A timing approach, on the other hand, is a declaration that one is smarter than most other people. Who wants to be average when they can be in a position to boast about their accomplishments?
hey, nearly half of us are above average.
Oh, if only that were true. The research on investor dollar-weighted returns does not paint a pretty picture, unfortunately. Investors as a group systematically pour money into rising markets (the most near market peaks) and then pull their money out during falling markets (the most near market bottoms). The result is lower dollar-weighted returns on investor money versus how the funds they invested actually performend had investors simply bought and held.
so if the majority of investors underperform the indices by doing "x", is it not plausible that a minority of investors could outperform the indices by doing "1/x"?

that minority investor could (could) be a boglehead employing P/E10 to alter his AA by up to 50% from his risk-tolerance established baseline. For example.

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Re:

Post by letsgobobby » Fri Oct 25, 2019 1:22 am

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fortyofforty
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Re: Mother

Post by fortyofforty » Fri Oct 25, 2019 6:48 pm

Wagnerjb wrote:
Thu Oct 15, 2009 8:44 am
Cody wrote:Mother told me not to gloat! It's very bad Karma.
Cody
In all seriousness, I wonder how I will react when that time comes. I am 52, and will be able to retire well before I am 60. When I am 67, how will I feel about my peers who still need to work (because they didn't have the discipline to save or invest well)?

I have no doubt that I will treat the "working" folks with respect. If a 67-year old is the valet parking attendant at the restaurant, I will undoubtedly treat him with the respect that I treat anybody else that I encounter in a similar situation. If a 67-year old is the front desk clerk at a hotel, I will do the same. If a 67-year old is the marshall at the golf course, I will do the same. If a 67-year old comes to paint my garage, I will do the same, etc.

I just don't know how I will react the first time I find myself paired with another 67 year old playing golf...and he tells me "I got my doctor to certify that I am disabled, so now I get $1500 a month from social security....and I don't ever have to work again".

That may be a far-fetched example, but I will certainly treat those putting in a honest day's work with far more respect than anybody milking the system.

Best wishes.
Not as far-fetched as you might think. The current fad is military disabilities, from what I've seen. Many are deserving, but many are not. And having worked in many "underprivileged" areas, I've seen countless folks who've won questionable lawsuits against companies (which, of course, are paid for by consumers of products and all who purchase insurance). There is a tremendous wealth transfer going on behind the scenes, in my opinion.
Indexing works, not because of magic, but because of math. | Diligentia. Vis. Celeritas. - Jeff Cooper | Original Vanguard Diehard

smectym
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Re: WaPo: Many Investors Have Sat Out Rally

Post by smectym » Fri Oct 25, 2019 11:24 pm

The difference between (1) “setting your asset allocation so you can sleep at night,” which is viewed on this board as virtuous, vs. (2) pulling money out of the market when it starts to crash, which we condemn as market-timing, is largely illusory. Why?

Because Investor’s initial “sleep-at-night” AA is set against the backdrop of a given state of market volatility.

If changes in market volatility cause the asset allocation which allows Investor to sleep at night to also change, then Investor’s withdrawal of funds to the point where Investor once again can sleep at night is simply a reiteration of (1), which we all agree is virtuous.

Some argue that Investor should ex ante, presciently, once and for ever, decide what AA would allow Investor to sleep at night no matter what in extremis state market volatility might reach. But such far-sighted omniscience is implausible. Nor is it necessary.

For, once Investor looks at the new state of market volatility market and mutters, “you know what, this is just a hell of a lot more than I bargained for!” Investor is perfectly rational to dial back the AA to something more comfortable...and then roll over and go back to sleep.

marcopolo
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Re: WaPo: Many Investors Have Sat Out Rally

Post by marcopolo » Sat Oct 26, 2019 1:03 am

smectym wrote:
Fri Oct 25, 2019 11:24 pm
The difference between (1) “setting your asset allocation so you can sleep at night,” which is viewed on this board as virtuous, vs. (2) pulling money out of the market when it starts to crash, which we condemn as market-timing, is largely illusory. Why?

Because Investor’s initial “sleep-at-night” AA is set against the backdrop of a given state of market volatility.

If changes in market volatility cause the asset allocation which allows Investor to sleep at night to also change, then Investor’s withdrawal of funds to the point where Investor once again can sleep at night is simply a reiteration of (1), which we all agree is virtuous.

Some argue that Investor should ex ante, presciently, once and for ever, decide what AA would allow Investor to sleep at night no matter what in extremis state market volatility might reach. But such far-sighted omniscience is implausible. Nor is it necessary.

For, once Investor looks at the new state of market volatility market and mutters, “you know what, this is just a hell of a lot more than I bargained for!” Investor is perfectly rational to dial back the AA to something more comfortable...and then roll over and go back to sleep.
I am not sure there is a black and white difference between what you describe as (1) and (2). You are right that deciding on an AA that i suitable for a lifetime is probably a impossible task. But, at the other extreme, if one decide that they have a new "sleep well at nite" AA at every twist and turn of the market, lots of data indicates that is a sure recipe for very poor portfolio performance. It seems that it might make more sense to have a limited number of changes to your AA based on your personal journey through life (starting investing, mid-career, at or near retirement, etc.) rather than based on gyrations of the market. If that approach is taken, then changes to AA are done without consideration of current market condition (NOT pull out when market crashes). I believe this clearly distinguishes your (1) and (2) scenarios.
Once in a while you get shown the light, in the strangest of places if you look at it right.

smectym
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Re: WaPo: Many Investors Have Sat Out Rally

Post by smectym » Sat Oct 26, 2019 1:56 am

marcopolo wrote:
Sat Oct 26, 2019 1:03 am
smectym wrote:
Fri Oct 25, 2019 11:24 pm
The difference between (1) “setting your asset allocation so you can sleep at night,” which is viewed on this board as virtuous, vs. (2) pulling money out of the market when it starts to crash, which we condemn as market-timing, is largely illusory. Why?

Because Investor’s initial “sleep-at-night” AA is set against the backdrop of a given state of market volatility.

If changes in market volatility cause the asset allocation which allows Investor to sleep at night to also change, then Investor’s withdrawal of funds to the point where Investor once again can sleep at night is simply a reiteration of (1), which we all agree is virtuous.

Some argue that Investor should ex ante, presciently, once and for ever, decide what AA would allow Investor to sleep at night no matter what in extremis state market volatility might reach. But such far-sighted omniscience is implausible. Nor is it necessary.

For, once Investor looks at the new state of market volatility market and mutters, “you know what, this is just a hell of a lot more than I bargained for!” Investor is perfectly rational to dial back the AA to something more comfortable...and then roll over and go back to sleep.
I am not sure there is a black and white difference between what you describe as (1) and (2). You are right that deciding on an AA that i suitable for a lifetime is probably a impossible task. But, at the other extreme, if one decide that they have a new "sleep well at nite" AA at every twist and turn of the market, lots of data indicates that is a sure recipe for very poor portfolio performance. It seems that it might make more sense to have a limited number of changes to your AA based on your personal journey through life (starting investing, mid-career, at or near retirement, etc.) rather than based on gyrations of the market. If that approach is taken, then changes to AA are done without consideration of current market condition (NOT pull out when market crashes). I believe this clearly distinguishes your (1) and (2) scenarios.
MarcoPolo, there is a lot of truth in your comment and I agree: a continual herky-jerky or scaredy-cat reaction to blips in the market in either direction is the worst possible approach

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fortyofforty
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Re: WaPo: Many Investors Have Sat Out Rally

Post by fortyofforty » Sat Oct 26, 2019 5:48 am

smectym wrote:
Sat Oct 26, 2019 1:56 am
marcopolo wrote:
Sat Oct 26, 2019 1:03 am
smectym wrote:
Fri Oct 25, 2019 11:24 pm
The difference between (1) “setting your asset allocation so you can sleep at night,” which is viewed on this board as virtuous, vs. (2) pulling money out of the market when it starts to crash, which we condemn as market-timing, is largely illusory. Why?

Because Investor’s initial “sleep-at-night” AA is set against the backdrop of a given state of market volatility.

If changes in market volatility cause the asset allocation which allows Investor to sleep at night to also change, then Investor’s withdrawal of funds to the point where Investor once again can sleep at night is simply a reiteration of (1), which we all agree is virtuous.

Some argue that Investor should ex ante, presciently, once and for ever, decide what AA would allow Investor to sleep at night no matter what in extremis state market volatility might reach. But such far-sighted omniscience is implausible. Nor is it necessary.

For, once Investor looks at the new state of market volatility market and mutters, “you know what, this is just a hell of a lot more than I bargained for!” Investor is perfectly rational to dial back the AA to something more comfortable...and then roll over and go back to sleep.
I am not sure there is a black and white difference between what you describe as (1) and (2). You are right that deciding on an AA that i suitable for a lifetime is probably a impossible task. But, at the other extreme, if one decide that they have a new "sleep well at nite" AA at every twist and turn of the market, lots of data indicates that is a sure recipe for very poor portfolio performance. It seems that it might make more sense to have a limited number of changes to your AA based on your personal journey through life (starting investing, mid-career, at or near retirement, etc.) rather than based on gyrations of the market. If that approach is taken, then changes to AA are done without consideration of current market condition (NOT pull out when market crashes). I believe this clearly distinguishes your (1) and (2) scenarios.
MarcoPolo, there is a lot of truth in your comment and I agree: a continual herky-jerky or scaredy-cat reaction to blips in the market in either direction is the worst possible approach
I think, too, that some investors jump into and out of equities in reaction to severe market moves. They aren't setting an asset allocation, and aren't trying to pick a balance between stocks and bonds that lets them sleep well. No, they want the bleeding to stop and pull out 100%, dumping what is left of their portfolio into a safer choice. Some reacted in the other direction during the tech boom of the late 1990s, putting all their chips into the tech stock pot. Whipsaw investing is what kills them.
Indexing works, not because of magic, but because of math. | Diligentia. Vis. Celeritas. - Jeff Cooper | Original Vanguard Diehard

Chadnudj
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Re: WaPo: Many Investors Have Sat Out Rally

Post by Chadnudj » Sat Oct 26, 2019 6:47 am

A. B. B.

Always. Be. Buying.

At least, that's my philosophy until I hit my number, whatever that is (hard to say right now with two young boys in daycare and a new house what our actual expenses are, and we're so far off that calculating 25X or 30X or 33X or whatever expenses is just a huge guessing game). So instead I'll be dollar cost averaging at all times via paycheck 401k contributions every week between my wife and I (paid every two weeks, but perfectly staggered so one of us gets a paycheck at the end of every week), and/or via bonuses/extra money leftover at the end of the month (sometimes happens, often doesn't).

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Re: WaPo: Many Investors Have Sat Out Rally

Post by Dottie57 » Sat Oct 26, 2019 7:03 am

Chadnudj wrote:
Sat Oct 26, 2019 6:47 am
A. B. B.

Always. Be. Buying.

At least, that's my philosophy until I hit my number, whatever that is (hard to say right now with two young boys in daycare and a new house what our actual expenses are, and we're so far off that calculating 25X or 30X or 33X or whatever expenses is just a huge guessing game). So instead I'll be dollar cost averaging at all times via paycheck 401k contributions every week between my wife and I (paid every two weeks, but perfectly staggered so one of us gets a paycheck at the end of every week), and/or via bonuses/extra money leftover at the end of the month (sometimes happens, often doesn't).
Putting that money in 401k every paycheck is extremely wise. In 20 years you will be happy with that balance and see the fruits of your labor. It is a great feeling.

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Re:

Post by CyclingDuo » Sat Oct 26, 2019 9:47 am

bob90245 wrote:
Fri Oct 16, 2009 10:49 am
letsgobobby wrote:
FrugalInvestor wrote:I think the Boglehead method is boring to most people and viewed as an admittance that they aren't any smarter than the next guy. A timing approach, on the other hand, is a declaration that one is smarter than most other people. Who wants to be average when they can be in a position to boast about their accomplishments?
hey, nearly half of us are above average.
Oh, if only that were true. The research on investor dollar-weighted returns does not paint a pretty picture, unfortunately. Investors as a group systematically pour money into rising markets (the most near market peaks) and then pull their money out during falling markets (the most near market bottoms). The result is lower dollar-weighted returns on investor money versus how the funds they invested actually performend had investors simply bought and held.
Zombie thread comes to life, but we can now confirm Bob0245's comment from 2009 in retrospect if we look at what the average investor's annualized return was between 1998 and 2017 (the color orange in the graph below) due to investor behavior at peaks and bottoms during a 20 year period in time of one's investing journey that included two significant drops...

Image

Will investor behavior be much different during the 20 years going forward?
"Everywhere is within walking distance if you have the time." ~ Steven Wright

michaeljc70
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Re:

Post by michaeljc70 » Sat Oct 26, 2019 10:05 am

letsgobobby wrote:
Thu Oct 15, 2009 11:41 pm
FrugalInvestor wrote:I think the Boglehead method is boring to most people and viewed as an admittance that they aren't any smarter than the next guy. A timing approach, on the other hand, is a declaration that one is smarter than most other people. Who wants to be average when they can be in a position to boast about their accomplishments?
hey, nearly half of us are above average.
But I bet it is like driving. In a study the vast majority (93% in the US) of drivers thought they are above average drivers. :shock:

blinx77
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Re:

Post by blinx77 » Sun Oct 27, 2019 7:57 am

JordanIB wrote:
Thu Oct 15, 2009 10:09 am
I just listened to one of the WaPo's own former stars, Tony Kornheiser, describe how he lost large sums of money, got scared right around March, and moved everything to cash, where it still sits today.

The last 12 months were a fantastic early test for a young (27 yo) still-learning Boglehead such as myself. I'm in 90% equities by virtue of the Vanguard 2045 in my IRA and the TR options in my 401k. Maxing these out every year from 2004-2007 was psychologically easy; deposit money, and watch it grow.

As the downturn started to hit, I made sure I did not sell, that I did not change my plan. I was the beneficiary of some fortuitous timing as well. Our bonuses are paid out in March, so the % of that paycheck going into the 401K was significantly larger than my bi-monthly contributions. I also too the opportunity then to bump my bi-monthly contributions to ensure that I would max out at the end of the year. Add in the nominal amount I hold in company stock, up 93% YTD, and I sure am glad to have stayed the course.

But as a previous poster noted, this isn't about gloating. For me, it's more of a thanks to the great community here from which I've learned an awful lot. My next lesson learned may be a move to 80/20 from 90/10, as I read about diminished returns for every 10% in equities. (While I stayed the course, I can't say I wasn't awfully nervous the whole time!)
No offense, but "staying the course" during the very mild and temporary dips we've seen this year is nothing like hanging on when major international banks were collapsing and headlines were screaming daily about the imminent collapse of the global financial system.

I did not have much in equities then (though I did hold on to what I had) but I did have a job offer in my last year of grad school that I wasn't sure would be honored. My realistic worst case was moving back in with my parents and re-orienting my career plans but I still had a pit in my stomach until 2011 or so when I had a couple years of work experience and some real savings in my pocket.

I'm still 85/15 with three kids and a mortgage now, so no lecture here about your AA. But I do want to be clear that a real crisis can be terrifying and hanging on in the face of your net worth getting cut in half, potential job loss, mortgage and mouths to feed, etc. can require some iron will.

IMO having am ample emergency fund (substantial, virtually no risk, liquid, ready for deployment) is actually more important to help stay the course than your particular preferred ratio of stocks to bonds. I try to stick to the Warren Buffet method of "keep enough cash to sleep at night, and dump the rest in equity index funds and ignore it" school of thought.

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Re: WaPo: Many Investors Have Sat Out Rally

Post by JoeRetire » Sun Oct 27, 2019 9:08 am

smectym wrote:
Fri Oct 25, 2019 11:24 pm
The difference between (1) “setting your asset allocation so you can sleep at night,” which is viewed on this board as virtuous, vs. (2) pulling money out of the market when it starts to crash, which we condemn as market-timing, is largely illusory. Why?

Because Investor’s initial “sleep-at-night” AA is set against the backdrop of a given state of market volatility.
Perhaps for the young and inexperienced that is true.

Certainly not for those of us who have lived through periods of recession, high-inflation, high unemployment, etc.
Don't be a lemming.

michaeljc70
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Re: WaPo: Many Investors Have Sat Out Rally

Post by michaeljc70 » Sun Oct 27, 2019 9:22 am

JoeRetire wrote:
Sun Oct 27, 2019 9:08 am
smectym wrote:
Fri Oct 25, 2019 11:24 pm
The difference between (1) “setting your asset allocation so you can sleep at night,” which is viewed on this board as virtuous, vs. (2) pulling money out of the market when it starts to crash, which we condemn as market-timing, is largely illusory. Why?

Because Investor’s initial “sleep-at-night” AA is set against the backdrop of a given state of market volatility.
Perhaps for the young and inexperienced that is true.

Certainly not for those of us who have lived through periods of recession, high-inflation, high unemployment, etc.
Exactly. I don't recall a market crash/drop that we didn't recover from either.

smectym
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Re: Re:

Post by smectym » Sun Oct 27, 2019 11:15 pm

blinx77 wrote:
Sun Oct 27, 2019 7:57 am
JordanIB wrote:
Thu Oct 15, 2009 10:09 am
I just listened to one of the WaPo's own former stars, Tony Kornheiser, describe how he lost large sums of money, got scared right around March, and moved everything to cash, where it still sits today.

The last 12 months were a fantastic early test for a young (27 yo) still-learning Boglehead such as myself. I'm in 90% equities by virtue of the Vanguard 2045 in my IRA and the TR options in my 401k. Maxing these out every year from 2004-2007 was psychologically easy; deposit money, and watch it grow.

As the downturn started to hit, I made sure I did not sell, that I did not change my plan. I was the beneficiary of some fortuitous timing as well. Our bonuses are paid out in March, so the % of that paycheck going into the 401K was significantly larger than my bi-monthly contributions. I also too the opportunity then to bump my bi-monthly contributions to ensure that I would max out at the end of the year. Add in the nominal amount I hold in company stock, up 93% YTD, and I sure am glad to have stayed the course.

But as a previous poster noted, this isn't about gloating. For me, it's more of a thanks to the great community here from which I've learned an awful lot. My next lesson learned may be a move to 80/20 from 90/10, as I read about diminished returns for every 10% in equities. (While I stayed the course, I can't say I wasn't awfully nervous the whole time!)
No offense, but "staying the course" during the very mild and temporary dips we've seen this year is nothing like hanging on when major international banks were collapsing and headlines were screaming daily about the imminent collapse of the global financial system.

I did not have much in equities then (though I did hold on to what I had) but I did have a job offer in my last year of grad school that I wasn't sure would be honored. My realistic worst case was moving back in with my parents and re-orienting my career plans but I still had a pit in my stomach until 2011 or so when I had a couple years of work experience and some real savings in my pocket.

I'm still 85/15 with three kids and a mortgage now, so no lecture here about your AA. But I do want to be clear that a real crisis can be terrifying and hanging on in the face of your net worth getting cut in half, potential job loss, mortgage and mouths to feed, etc. can require some iron will.

IMO having am ample emergency fund (substantial, virtually no risk, liquid, ready for deployment) is actually more important to help stay the course than your particular preferred ratio of stocks to bonds. I try to stick to the Warren Buffet method of "keep enough cash to sleep at night, and dump the rest in equity index funds and ignore it" school of thought.
>>”A real crisis can be terrifying and hanging on...can require some iron will.”

blinx77, in the midst of the “real crisis” you so evocatively depict, at least for older investors with a large pool of potentially irreplaceable assets, discretion is the better part of valor; and most are better off trading their “iron will” for a stiff shot of “Nervous Nellie.” The 50-year-old Investor with spouse and kids depending on his decision-making skills had better make good decisions. Holding 85% equity and then “ignoring” it during a 30-50% crisis drawdown while chanting “Stay the Course” could be the blunder of a lifetime.

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Re: WaPo: Many Investors Have Sat Out Rally

Post by White Coat Investor » Mon Oct 28, 2019 12:44 am

Zombie thread.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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Re: Mother

Post by unclescrooge » Mon Oct 28, 2019 2:04 am

fortyofforty wrote:
Fri Oct 25, 2019 6:48 pm
Wagnerjb wrote:
Thu Oct 15, 2009 8:44 am
Cody wrote:Mother told me not to gloat! It's very bad Karma.
Cody
In all seriousness, I wonder how I will react when that time comes. I am 52, and will be able to retire well before I am 60. When I am 67, how will I feel about my peers who still need to work (because they didn't have the discipline to save or invest well)?

I have no doubt that I will treat the "working" folks with respect. If a 67-year old is the valet parking attendant at the restaurant, I will undoubtedly treat him with the respect that I treat anybody else that I encounter in a similar situation. If a 67-year old is the front desk clerk at a hotel, I will do the same. If a 67-year old is the marshall at the golf course, I will do the same. If a 67-year old comes to paint my garage, I will do the same, etc.

I just don't know how I will react the first time I find myself paired with another 67 year old playing golf...and he tells me "I got my doctor to certify that I am disabled, so now I get $1500 a month from social security....and I don't ever have to work again".

That may be a far-fetched example, but I will certainly treat those putting in a honest day's work with far more respect than anybody milking the system.

Best wishes.
Not as far-fetched as you might think. The current fad is military disabilities, from what I've seen. Many are deserving, but many are not. And having worked in many "underprivileged" areas, I've seen countless folks who've won questionable lawsuits against companies (which, of course, are paid for by consumers of products and all who purchase insurance). There is a tremendous wealth transfer going on behind the scenes, in my opinion.
Actually, I see a lot of police/fireman going out on disability for to back related issues. They get early retirement and due to the disability, it's tax free.

I didn't know if it's a scam, but it seems statistically unlikely that such a large percentage of people are disabled, while also able to be gainfully employed 40 hours a week elsewhere. 🤔

Ari
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Re: Re:

Post by Ari » Mon Oct 28, 2019 4:36 am

blinx77 wrote:
Sun Oct 27, 2019 7:57 am
JordanIB wrote:
Thu Oct 15, 2009 10:09 am
I just listened to one of the WaPo's own former stars, Tony Kornheiser, describe how he lost large sums of money, got scared right around March, and moved everything to cash, where it still sits today.

The last 12 months were a fantastic early test for a young (27 yo) still-learning Boglehead such as myself. I'm in 90% equities by virtue of the Vanguard 2045 in my IRA and the TR options in my 401k. Maxing these out every year from 2004-2007 was psychologically easy; deposit money, and watch it grow.

As the downturn started to hit, I made sure I did not sell, that I did not change my plan. I was the beneficiary of some fortuitous timing as well. Our bonuses are paid out in March, so the % of that paycheck going into the 401K was significantly larger than my bi-monthly contributions. I also too the opportunity then to bump my bi-monthly contributions to ensure that I would max out at the end of the year. Add in the nominal amount I hold in company stock, up 93% YTD, and I sure am glad to have stayed the course.

But as a previous poster noted, this isn't about gloating. For me, it's more of a thanks to the great community here from which I've learned an awful lot. My next lesson learned may be a move to 80/20 from 90/10, as I read about diminished returns for every 10% in equities. (While I stayed the course, I can't say I wasn't awfully nervous the whole time!)
No offense, but "staying the course" during the very mild and temporary dips we've seen this year is nothing like hanging on when major international banks were collapsing and headlines were screaming daily about the imminent collapse of the global financial system.
No offense, but the comment you are replying to was written in 2009, and the crisis referred to was indeed a time when "major international banks were collapsing and headlines were screaming daily about the imminent collapse of the global financial system". :D
All in, all the time.

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Cheez-It Guy
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Re: WaPo: Many Investors Have Sat Out Rally

Post by Cheez-It Guy » Mon Oct 28, 2019 5:42 am

Cheez-It Guy: Many Bogleheads Have Sat Out Previous Decade Of This Thread

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firebirdparts
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Re: WaPo: Many Investors Have Sat Out Rally

Post by firebirdparts » Mon Oct 28, 2019 8:16 am

Now that this thread is 10 years old, and $1 invested in the plain 'ol S&P 500 has quadrupled in 10 years, it does make some sense to reflect on what you did in those 10 years. I admit that I tried to time the market during the Euro-Greek-Bonds crisis. As a young accumulator, I was 100% stocks for a long time, but the idea of market timing is a great temptation for me. So you learn, right? That was a bad idea. However, I did some things right and as a result I am going to be okay overall.

I am 53 now and I am taking much more interest these days in a portfolio holding some bonds.

I don't have any idea what everybody else did.
A fool and your money are soon partners

EddyB
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Re: WaPo: Many Investors Have Sat Out Rally

Post by EddyB » Mon Oct 28, 2019 10:01 am

JoeRetire wrote:
Sun Oct 27, 2019 9:08 am
smectym wrote:
Fri Oct 25, 2019 11:24 pm
The difference between (1) “setting your asset allocation so you can sleep at night,” which is viewed on this board as virtuous, vs. (2) pulling money out of the market when it starts to crash, which we condemn as market-timing, is largely illusory. Why?

Because Investor’s initial “sleep-at-night” AA is set against the backdrop of a given state of market volatility.
Perhaps for the young and inexperienced that is true.

Certainly not for those of us who have lived through periods of recession, high-inflation, high unemployment, etc.

Sheepdog’s great thread from 2008 convinced me that the “certainly not” claim is untrue.

viewtopic.php?t=25126

StandingRock
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Re: WaPo: Many Investors Have Sat Out Rally

Post by StandingRock » Mon Oct 28, 2019 10:06 am

Cheez-It Guy wrote:
Mon Oct 28, 2019 5:42 am
Cheez-It Guy: Many Bogleheads Have Sat Out Previous Decade Of This Thread
Yes, I don't even look at this forum that often, but I still occasionally see the people posting "Should I invest with the market so high" or some other variation of that question, fear is understandable but like they say either s*** or get off the pot.

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CyclingDuo
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Re: Re:

Post by CyclingDuo » Mon Oct 28, 2019 10:28 am

blinx77 wrote:
Sun Oct 27, 2019 7:57 am
No offense, but "staying the course" during the very mild and temporary dips we've seen this year is nothing like hanging on when major international banks were collapsing and headlines were screaming daily about the imminent collapse of the global financial system.

I did not have much in equities then (though I did hold on to what I had) but I did have a job offer in my last year of grad school that I wasn't sure would be honored. My realistic worst case was moving back in with my parents and re-orienting my career plans but I still had a pit in my stomach until 2011 or so when I had a couple years of work experience and some real savings in my pocket.

I'm still 85/15 with three kids and a mortgage now, so no lecture here about your AA. But I do want to be clear that a real crisis can be terrifying and hanging on in the face of your net worth getting cut in half, potential job loss, mortgage and mouths to feed, etc. can require some iron will.

IMO having am ample emergency fund (substantial, virtually no risk, liquid, ready for deployment) is actually more important to help stay the course than your particular preferred ratio of stocks to bonds. I try to stick to the Warren Buffet method of "keep enough cash to sleep at night, and dump the rest in equity index funds and ignore it" school of thought.
Most Boomers - as investors - experienced 2 of the 5 severe drops that took place over the prior 9 decades which will continue to color their recency bias for the remainder of their investing days. Many of those same Boomers (wife and I are members of the Boomer demographic) also had started to or were just starting to invest in time to experience the 1987 Black Monday historic drop, and the recession of 1990-91. We have BH members that are old enough to have experienced even more than that as investors. The sharing of their experiences and lessons learned are valuable sources.

Image

Whether such experiences make you wise in retrospect of what one did or didn't do, or hardens you as an investor, or numbs you, or leads to one just giving up and sitting out for years or longer - it is what it is.

We shouldn't overlook what happened during 2018, either. The 4th quarter that led to an extreme watershed event (one that has only occurred 4 prior times since 1980 in 1982, 1989, 1991, and 2009) on Christmas Eve is worth studying and comparing to previous similar watershed events: https://www.youtube.com/watch?v=F9Dd6TK ... e=youtu.be

And their October follow up...

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

Whatever the market is currently telling us about the upcoming quarters, recessions can be odd with regard to the performance of the S&P 500 as this graph shows from prior recessions...

Image

All the best for the next few decades. :beer
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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JoeRetire
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Re: WaPo: Many Investors Have Sat Out Rally

Post by JoeRetire » Mon Oct 28, 2019 11:33 am

EddyB wrote:
Mon Oct 28, 2019 10:01 am
JoeRetire wrote:
Sun Oct 27, 2019 9:08 am
smectym wrote:
Fri Oct 25, 2019 11:24 pm
The difference between (1) “setting your asset allocation so you can sleep at night,” which is viewed on this board as virtuous, vs. (2) pulling money out of the market when it starts to crash, which we condemn as market-timing, is largely illusory. Why?

Because Investor’s initial “sleep-at-night” AA is set against the backdrop of a given state of market volatility.
Perhaps for the young and inexperienced that is true.

Certainly not for those of us who have lived through periods of recession, high-inflation, high unemployment, etc.

Sheepdog’s great thread from 2008 convinced me that the “certainly not” claim is untrue.

viewtopic.php?t=25126
Fair enough. I should have just stuck with "certainly not for those of us who know better".
Don't be a lemming.

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JoeRetire
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Re: WaPo: Many Investors Have Sat Out Rally

Post by JoeRetire » Mon Oct 28, 2019 11:35 am

firebirdparts wrote:
Mon Oct 28, 2019 8:16 am
Now that this thread is 10 years old, and $1 invested in the plain 'ol S&P 500 has quadrupled in 10 years, it does make some sense to reflect on what you did in those 10 years. I admit that I tried to time the market during the Euro-Greek-Bonds crisis.

I don't have any idea what everybody else did.
Not that.
Don't be a lemming.

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Portfolio7
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Re: WaPo: Many Investors Have Sat Out Rally

Post by Portfolio7 » Tue Oct 29, 2019 4:25 am

JoeRetire wrote:
Mon Oct 28, 2019 11:35 am
firebirdparts wrote:
Mon Oct 28, 2019 8:16 am
Now that this thread is 10 years old, and $1 invested in the plain 'ol S&P 500 has quadrupled in 10 years, it does make some sense to reflect on what you did in those 10 years. I admit that I tried to time the market during the Euro-Greek-Bonds crisis.

I don't have any idea what everybody else did.
Not that.
I bailed in the GFC, but intentionally in consistent adjustments, over about a year. 100% stocks in Nov 2007. Moved 10% to bonds in Dec. Kept it up every month or two until late 2008 I was 100% bonds and stable value. I bought back in late 2009, ending up with a conservative 60/40 portfolio that I held for about 5 years. I wouldn't do that again, but it turned out reasonably well for me. I will say, the scope of the GFC freaked me out.
"An investment in knowledge pays the best interest" - Benjamin Franklin

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fortyofforty
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Re: WaPo: Many Investors Have Sat Out Rally

Post by fortyofforty » Tue Oct 29, 2019 5:55 am

It's very easy to forget, watching "experts" on television, listening to "experts" on the radio or podcasts, or reading "experts" in newspapers and magazines, that they truly don't know what will happen in the stock market or the economy as a whole. In a sense, some of them will be right and some wrong just based on chance, but the media have an interest in getting eyeballs and clicks, so pushing dire warnings as gospel sells. People tend to get fearful, and probably tune in and read more if the headline is scary, warning of the coming crisis, or the next stock market crash. It's a vicious cycle, and very detrimental to the building of long-term wealth and prosperity.
Indexing works, not because of magic, but because of math. | Diligentia. Vis. Celeritas. - Jeff Cooper | Original Vanguard Diehard

Chadnudj
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Re: WaPo: Many Investors Have Sat Out Rally

Post by Chadnudj » Wed Nov 06, 2019 7:10 am

Dottie57 wrote:
Sat Oct 26, 2019 7:03 am
Chadnudj wrote:
Sat Oct 26, 2019 6:47 am
A. B. B.

Always. Be. Buying.

At least, that's my philosophy until I hit my number, whatever that is (hard to say right now with two young boys in daycare and a new house what our actual expenses are, and we're so far off that calculating 25X or 30X or 33X or whatever expenses is just a huge guessing game). So instead I'll be dollar cost averaging at all times via paycheck 401k contributions every week between my wife and I (paid every two weeks, but perfectly staggered so one of us gets a paycheck at the end of every week), and/or via bonuses/extra money leftover at the end of the month (sometimes happens, often doesn't).
Putting that money in 401k every paycheck is extremely wise. In 20 years you will be happy with that balance and see the fruits of your labor. It is a great feeling.
Yep -- I'm only 13 years out from getting my first post-law school job, and between my wife and I we've saved up a pretty decent amount in retirement accounts (despite some ups and downs, which happen). Another 7 years (or even 20), and we're going to be in excellent shape if we can keep it up. (If not sooner -- once those full-time daycare expenses go away, that's REALLY gonna change our situation, I hope)

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Re: WaPo: Many Investors Have Sat Out Rally

Post by an_asker » Wed Nov 06, 2019 9:24 am

White Coat Investor wrote:
Mon Oct 28, 2019 12:44 am
Zombie thread.
True dat. But as applicable right now as it was a decade ago! Here's a (real) story.

About 13-14 months ago, we decided that it was time to cash out some of DW's ESPP as her company had reached new highs (not a tech company, in case you were wondering). The pot we were looking at just about got into five figures, so might or might not be a big amount, depending on who you (the reader) are! For us, it was not insignificant.

Now usually, I am a DCA kinda guy. In this case though, we wanted to be in the market, so dumped the entire amount into SPY. AND. IT. CRASHED.

Down about 20% in a month IIRC. I panicked, read up all TLA threads. Realized that if I really really needed to be kosher about it, I would have to look at 401(k) etc ... which was steadily collecting S&P500.

So I (we) dithered ... and we were in 2019. Now I thought there is no point in TLAing as SPY was starting to lift up again. Fast forward to now, and we are sitting on about 20% gains on the original sum - while DW's company stock has gone sideways.

I am wondering what would have happened if we had been able o TLA. Probably not a big difference ... except we would have paid a bit less tax and would have had a little less return (would've switched to Total Stock Market which has lagged S&P500 by a couple of percentage points YTD).

Moral of the story: It is a really bad feeling to sit out a rally!

protagonist
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Re: WaPo: Many Investors Have Sat Out Rally

Post by protagonist » Wed Nov 06, 2019 10:45 am

The flip side of "recency bias" is that all recent crashes and bear markets have bounced back quickly....and bounced back in spades. A decade after 2009 the Dow went from the 6000s to the 27000s. There is no reason to have assumed in 2009 that it could not have as easily slowly declined over the past decade into the 3000s or worse, especially in the heat of the crisis.
It is very easy to be lulled into complacency. Keep all your money in the stock market, stay the course, and just wait it out. Keep investing more in the dips...they are buying opportunities. That's the way it always works. Any dip will be followed by a rally. You won't have to wait long.

This is dangerous turf for retirees who depend on their savings.

nigel_ht
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Re: WaPo: Many Investors Have Sat Out Rally

Post by nigel_ht » Wed Nov 06, 2019 11:38 am

protagonist wrote:
Wed Nov 06, 2019 10:45 am
The flip side of "recency bias" is that all recent crashes and bear markets have bounced back quickly....and bounced back in spades. A decade after 2009 the Dow went from the 6000s to the 27000s. There is no reason to have assumed in 2009 that it could not have as easily slowly declined over the past decade into the 3000s or worse, especially in the heat of the crisis.
It is very easy to be lulled into complacency. Keep all your money in the stock market, stay the course, and just wait it out. Keep investing more in the dips...they are buying opportunities. That's the way it always works. Any dip will be followed by a rally. You won't have to wait long.

This is dangerous turf for retirees who depend on their savings.
Landscape looks very different to me in 2019 at 54 than it did when I was 44 in 2009..."staying the course" was a lot easier when retirement wasn't 8-10 years away.

The other landscape changing statistic is 56% of workers over 50 suffer an involuntary job loss.

Someone above said there has never been a crash we hadn't recovered from. There are probably Japanese investors that said the same thing in 1989...

Needless to say it would seriously suck to start an involuntary "early retirement" with 50% of the nest egg you once had heading into a lost decade.

stocknoob4111
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Re: WaPo: Many Investors Have Sat Out Rally

Post by stocknoob4111 » Wed Nov 06, 2019 12:17 pm

Japanese situation has been covered here many times, the Japanese bubble was on a scale many times our current levels... Dow would now have to be at 60000 and S&P 500 at 8000+ to be equivalent... we are not even close.

protagonist
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Re: WaPo: Many Investors Have Sat Out Rally

Post by protagonist » Wed Nov 06, 2019 12:20 pm

nigel_ht wrote:
Wed Nov 06, 2019 11:38 am
protagonist wrote:
Wed Nov 06, 2019 10:45 am
The flip side of "recency bias" is that all recent crashes and bear markets have bounced back quickly....and bounced back in spades. A decade after 2009 the Dow went from the 6000s to the 27000s. There is no reason to have assumed in 2009 that it could not have as easily slowly declined over the past decade into the 3000s or worse, especially in the heat of the crisis.
It is very easy to be lulled into complacency. Keep all your money in the stock market, stay the course, and just wait it out. Keep investing more in the dips...they are buying opportunities. That's the way it always works. Any dip will be followed by a rally. You won't have to wait long.

This is dangerous turf for retirees who depend on their savings.
Landscape looks very different to me in 2019 at 54 than it did when I was 44 in 2009..."staying the course" was a lot easier when retirement wasn't 8-10 years away.

The other landscape changing statistic is 56% of workers over 50 suffer an involuntary job loss.

Someone above said there has never been a crash we hadn't recovered from. There are probably Japanese investors that said the same thing in 1989...

Needless to say it would seriously suck to start an involuntary "early retirement" with 50% of the nest egg you once had heading into a lost decade.
I'm not pessimistic about the economy, but neither am I optimistic. I am a realist. And the reality is that the stock market is a complex, chaotic system and anything can potentially happen. We can't even begin to calculate the odds of various scenarios going forward 30 or 50 years with ANY accuracy at all, and all your assumptions you type into FIRECalc should be taken with a grain of salt.
When you are looking at a future horizon of possibly 30 or 50 years, even 100 or more years of data is just "recency bias".

My approach as a retiree is to invest what I anticipate needing to not significantly compromise my life style very conservatively, and keep the rest in the stock market, which I consider "gambling money". Percent allocations are irrelevant to me. If I am lucky it will make me a rich old man though I doubt that I will live very differently....if I am unlucky not a whole lot will change except my heirs might be disappointed. I have no theories about what will happen. To quote Firesign Theatre, I am just a bozo on this bus.

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