U.S. stocks in freefall

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InvestorNewb
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Re: U.S. stocks in freefall

Post by InvestorNewb » Fri Jan 22, 2016 9:19 pm

wesgreen wrote:If you think of 16 years as a " very long period of time", Bogle's strategy probably isn't for you.


I would argue that it is a very long time considering that 16 years is typically more than half of one's investing lifetime. I.e. consider someone who starts investing at age 30 and retires at 60. At 46 years old, that person is more than half way to retirement.
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Re: U.S. stocks in freefall

Post by OutInThirteen » Fri Jan 22, 2016 9:24 pm

InvestorNewb wrote:
wesgreen wrote:If you think of 16 years as a " very long period of time", Bogle's strategy probably isn't for you.


I would argue that it is a very long time considering that 16 years is typically more than half of one's investing lifetime. I.e. consider someone who starts investing at age 30 and retires at 60. At 46 years old, that person is more than half way to retirement.

I plan on investing until I die. You have to add in all of the years in retirement, also.

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Re: U.S. stocks in freefall

Post by visualguy » Fri Jan 22, 2016 9:26 pm

HomerJ,

16-years is a long time in the context of human lifespan... When you have a meaningful amount of money, you are probably middle aged, and have maybe 10-15 years until retirement, and then maybe 20 years of retirement. Highly-volatile investments that may go nowhere ultimately after 16 years aren't a good thing considering those time horizons...

As someone else mentioned, it's basically a bet, and that's fine as long as one understands it for what it is. My issue when reading posts here is that I get the impression that many think that it's somehow a sure thing as long as you stay the course over a "long term" which isn't really well-defined. I find that the stock market can be brutal even over long periods of time (such as 16 years) as has been the case with non-US over the last couple of decades, and at other times before (in both non-US and US).

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Re: U.S. stocks in freefall

Post by CantPassAgain » Fri Jan 22, 2016 10:07 pm

visualguy wrote:HomerJ,

16-years is a long time in the context of human lifespan... When you have a meaningful amount of money, you are probably middle aged, and have maybe 10-15 years until retirement, and then maybe 20 years of retirement. Highly-volatile investments that may go nowhere ultimately after 16 years aren't a good thing considering those time horizons...

As someone else mentioned, it's basically a bet, and that's fine as long as one understands it for what it is. My issue when reading posts here is that I get the impression that many think that it's somehow a sure thing as long as you stay the course over a "long term" which isn't really well-defined. I find that the stock market can be brutal even over long periods of time (such as 16 years) as has been the case with non-US over the last couple of decades, and at other times before (in both non-US and US).


I didn't realize boglehead-ism and "stay the course" meant stay 100% stocks all the time for your entire life. I thought it meant something else. Maybe I should read the wiki again or something.
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Re: U.S. stocks in freefall

Post by visualguy » Fri Jan 22, 2016 10:22 pm

CantPassAgain wrote:I didn't realize boglehead-ism and "stay the course" meant stay 100% stocks all the time for your entire life. I thought it meant something else. Maybe I should read wiki again or something.


Exactly. The bulk of your retirement money isn't in the stock market for all that long in your investing life. Maybe you have big bucks there from close to middle age (don't have much money to put aside when you're young) until close to retirement (need to phase out). Hence, 16 years is indeed a very long time. If you hit the wrong period (like we just did with non-US), you are in trouble. It really is a bet, and not as solid a bet as many here seem to believe for some reason that I don't fully understand.

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Re: U.S. stocks in freefall

Post by CantPassAgain » Fri Jan 22, 2016 10:39 pm

visualguy wrote:
CantPassAgain wrote:I didn't realize boglehead-ism and "stay the course" meant stay 100% stocks all the time for your entire life. I thought it meant something else. Maybe I should read wiki again or something.


Exactly. The bulk of your retirement money isn't in the stock market for all that long in your investing life. Maybe you have big bucks there from close to middle age (don't have much money to put aside when you're young) until close to retirement (need to phase out). Hence, 16 years is indeed a very long time. If you hit the wrong period (like we just did with non-US), you are in trouble. It really is a bet, and not as solid a bet as many here seem to believe for some reason that I don't fully understand.


Dollar cost averaging into a diversified, low cost portfolio of stocks and bonds over decades is a pretty darn good bet for success...no it's not a sure thing but there is really no need for fear mongering. "If you hit the wrong period you are in trouble".....not really if you have a plan. And then stick with your plan.

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Re: U.S. stocks in freefall

Post by ogrehead » Fri Jan 22, 2016 11:01 pm

CantPassAgain wrote:"If you hit the wrong period you are in trouble".....not really if you have a plan. And then stick with your plan.

I don't think it's so simple either way. If bad things happen bad things happen. It certainly helps to have a plan, but you can't simply plan for bad things to happen or for bad thing not to be bad.

Life is full of risks. You can't hedge them all, and excessive hedging can limit your upside in any event. Picture someone spending their life hiding under their bed with their curtains drawn, afraid to go out of the house.

A horrible decade in the economy and markets centered around your retirement date can put you in trouble regardless of your plan. Working longer may not be an option. Don't invest in stocks; you could end up with nowhere near enough to live on and inflation eating all your returns. etc. etc.

At the end of the day nothing matters for having sufficient retirement savings so much as saving enough. What's solidly in your control is cutting discretionary expenditures and saving the difference. Increasing earnings is also a huge factor, but that's not within everyone's means either; pivoting, education, retraining, switching jobs, these all involve risks too.

Even saving more is another "risk," you could be sacrificing and living like a monk and slaving away for some of your best working years and get hit by a bus; did you make the right choice?

Risk happens, plans are to manage it in a way that fits you, not to make them harmless or go away.

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Re: U.S. stocks in freefall

Post by HomerJ » Fri Jan 22, 2016 11:04 pm

visualguy wrote:My issue when reading posts here is that I get the impression that many think that it's somehow a sure thing as long as you stay the course over a "long term" which isn't really well-defined.


Some people do seem to think that... I agree that's a problem... There are plenty of people who think it's "normal" for a stock market to crash, then recover in a short 1-2 years. Many of us though recognize that risk is real, and that a stock market can crash and stay down for an extended period.

Therefore we plan for 4% withdrawals, and we plan for more conservative AAs when as we near retirement. BECAUSE 1966-1982 happened. It is in our plans.

I find that the stock market can be brutal even over long periods of time (such as 16 years) as has been the case with non-US over the last couple of decades, and at other times before (in both non-US and US).


So far anyone who "stayed the course" in the U.S. did just fine, even through those bad 16 years. Both the decades before that 16 year stretch and the decades after did very well... Bull markets appear to follow bear markets. The long-term historical return of 9%-10% nominal INCLUDES bear-markets, including that 16-year stretch.

Even sitting through bear markets, so far, one has done just fine in the U.S. Staying the course HAS worked, so far...

Notice how many times I said "so far". It doesn't mean it is guaranteed to work in the future.

But you're wrong when you say "stay the course" hasn't worked in the U.S. past.

And besides, name a better strategy... :)
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Re: U.S. stocks in freefall

Post by CantPassAgain » Fri Jan 22, 2016 11:05 pm

lack_ey wrote:Just imagine if US returns were what emerging markets was the last 10 years:

Image

Negative after inflation. Well, it's happened for 16 years in the US, certainly much longer than that in other markets. And even Vanguard's relatively optimistic annual investment outlooks would put that at a ~15% chance or so for the next ten years here starting about today (the exact number is unclear because it falls between histogram bins).

Better be ready for anything, whether it's some more nosediving, a rebound, a whole lot of sideways, or whatever.


Shift that 10 year chart ahead by a single year (1/22/05-1/21/15), and that $11,500 turns into $23,000. Who knows what the 1/22/07-1/21/17 chart will look like. But if you keeping investing with each paycheck into a diversified, low cost, low turnover portfolio, over several decades, and never bear to much or too little risk considering your circumstances, the chances for success are pretty good.

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Re: U.S. stocks in freefall

Post by CantPassAgain » Fri Jan 22, 2016 11:09 pm

ogrehead wrote:
CantPassAgain wrote:"If you hit the wrong period you are in trouble".....not really if you have a plan. And then stick with your plan.

I don't think it's so simple either way. If bad things happen bad things happen. It certainly helps to have a plan, but you can't simply plan for bad things to happen or for bad thing not to be bad.

Life is full of risks. You can't hedge them all, and excessive hedging can limit your upside in any event. Picture someone spending their life hiding under their bed with their curtains drawn, afraid to go out of the house.

A horrible decade in the economy and markets centered around your retirement date can put you in trouble regardless of your plan. Working longer may not be an option. Don't invest in stocks; you could end up with nowhere near enough to live on and inflation eating all your returns. etc. etc.

At the end of the day nothing matters for having sufficient retirement savings so much as saving enough. What's solidly in your control is cutting discretionary expenditures and saving the difference. Increasing earnings is also a huge factor, but that's not within everyone's means either; pivoting, education, retraining, switching jobs, these all involve risks too.

Even saving more is another "risk," you could be sacrificing and living like a monk and slaving away for some of your best working years and get hit by a bus; did you make the right choice?

Risk happens, plans are to manage it in a way that fits you, not to make them harmless or go away.


I don't disagree. Bad things happen. Car accidents, cancer, wars. Life can be scary. I just don't think that's a reason for coming to bogleheads and dumping on the philosophy and spreading fear about the stock market.

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Re: U.S. stocks in freefall

Post by lack_ey » Fri Jan 22, 2016 11:17 pm

CantPassAgain wrote:Shift that 10 year chart ahead by a single year (1/22/05-1/21/15), and that $11,500 turns into $23,000. Who knows what the 1/22/07-1/21/17 chart will look like. But if you keeping investing with each paycheck into a diversified, low cost, low turnover portfolio, over several decades, and never bear to much or too little risk considering your circumstances, the chances for success are pretty good.


Sure, I like the chances in world stock markets myself, especially if consistently employed through all kinds of periods. They're just chances though, even if they're good ones. And some people aren't lucky enough to be fully employed in good jobs and making enough money to save substantially over several decades.

We might even see 15 years of negative global stock returns over some period. That might happen right when somebody retires (or worse, is forced into retirement). I hope that person isn't me, is all I'm saying. Plan using realistic assumptions, whatever you think those are, considering a full range of potential outcomes, and live with the results.

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Re: U.S. stocks in freefall

Post by ogrehead » Fri Jan 22, 2016 11:18 pm

CantPassAgain wrote:I don't disagree. Bad things happen. Car accidents, cancer, wars. Life can be scary. I just don't think that's a reason for coming to bogleheads and dumping on the philosophy and spreading fear about the stock market.

I don't disagree either, but I also don't think the correct response to fearmongering is to downplay risk, pretend that awful things can't or don't happen in the markets or economy that can simply be planned away.

It's like all the people complaining (at least up until a couple weeks ago) that stocks are so expensive; well, maybe they are, but what isn't?

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Re: U.S. stocks in freefall

Post by CantPassAgain » Fri Jan 22, 2016 11:23 pm

lack_ey wrote:Plan using realistic assumptions, whatever you think those are, considering a full range of potential outcomes, and live with the results.


Yep. So what's the problem, again? :sharebeer

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Re: U.S. stocks in freefall

Post by lack_ey » Fri Jan 22, 2016 11:27 pm

Dunno, I just posted a chart a while back. I'm kind of morbidly curious what the mood on the boards would be if that chart were US stock returns rather than EM stock returns. :D

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Re: U.S. stocks in freefall

Post by HomerJ » Fri Jan 22, 2016 11:29 pm

ogrehead wrote:A horrible decade in the economy and markets centered around your retirement date can put you in trouble regardless of your plan. Working longer may not be an option. Don't invest in stocks; you could end up with nowhere near enough to live on and inflation eating all your returns. etc. etc.


You can plan for a horrible decade in the economy right when you retire. In fact, if you don't, you're doing it wrong.

Risk happens, plans are to manage it in a way that fits you, not to make them harmless or go away.


That is correct. You can't plan for every risk. You can't make them harmless or go away. Bad things do happen. But you do your best to plan for possible bad-case scenarios.

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Re: U.S. stocks in freefall

Post by HomerJ » Fri Jan 22, 2016 11:32 pm

lack_ey wrote:Dunno, I just posted a chart a while back. I'm kind of morbidly curious what the mood on the boards would be if that chart were US stock returns rather than EM stock returns. :D


Go back to 2009 threads and you can see...

There were plenty of threads pointing out that we had just experienced a full DECADE of negative growth. 1999-2009 was a terrible decade.

You find plenty of people panicing. You will also find posts from people like me stating that bad decades are NORMAL. Posts talking about 1966-1982 in fact, and how this isn't new. Posts talking about how people invest every year, not just at the peak in 1999.

Anyone who "stayed the course" from 1999-2016 is doing just fine right now, even though they had experienced a terrible decade.

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Re: U.S. stocks in freefall

Post by HomerJ » Fri Jan 22, 2016 11:35 pm

ogrehead wrote:
CantPassAgain wrote:I don't disagree. Bad things happen. Car accidents, cancer, wars. Life can be scary. I just don't think that's a reason for coming to bogleheads and dumping on the philosophy and spreading fear about the stock market.

I don't disagree either, but I also don't think the correct response to fearmongering is to downplay risk, pretend that awful things can't or don't happen in the markets or economy that can simply be planned away.


When have any of the long-term posters on this board pretended that awful things don't happen in the markets?

Setting an appropriate Asset Allocation (probably the biggest topic on this board) is all about managing risk.

Open any "Why not 100% stocks?" thread, and within 10-15 posts, you'll have a couple of old hands talking about risk, and that awful things can happen.

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Re: U.S. stocks in freefall

Post by ogrehead » Sat Jan 23, 2016 12:17 am

HomerJ wrote:
ogrehead wrote:A horrible decade in the economy and markets centered around your retirement date can put you in trouble regardless of your plan. Working longer may not be an option. Don't invest in stocks; you could end up with nowhere near enough to live on and inflation eating all your returns. etc. etc.


You can plan for a horrible decade in the economy right when you retire. In fact, if you don't, you're doing it wrong.

I'm don't think arguing about semantics contributes much, but what I was responding to was the statement that if you have a plan, you're not in trouble. I don't think parsing the phrase "in trouble" helps much. All I'm saying is that you can have a plan that encompasses getting bone cancer at age 30 or being disabled at age 65 in the middle of a great depression, but that doesn't mean it's not going to suck badly for a person of ordinary means in that situation with the best of plans. And a disaster-optimized plan is probably not the best overall plan. That's all.

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Re: U.S. stocks in freefall

Post by HomerJ » Sat Jan 23, 2016 12:41 am

ogrehead wrote:
HomerJ wrote:
ogrehead wrote:A horrible decade in the economy and markets centered around your retirement date can put you in trouble regardless of your plan. Working longer may not be an option. Don't invest in stocks; you could end up with nowhere near enough to live on and inflation eating all your returns. etc. etc.


You can plan for a horrible decade in the economy right when you retire. In fact, if you don't, you're doing it wrong.

I'm don't think arguing about semantics contributes much, but what I was responding to was the statement that if you have a plan, you're not in trouble. I don't think parsing the phrase "in trouble" helps much. All I'm saying is that you can have a plan that encompasses getting bone cancer at age 30 or being disabled at age 65 in the middle of a great depression, but that doesn't mean it's not going to suck badly for a person of ordinary means in that situation with the best of plans. And a disaster-optimized plan is probably not the best overall plan. That's all.


We probably agree more than we disagree... But you're wrong if you think Bogleheads are about assuming everything is going to work out great.

The MAJORITY of posts on these boards is about handling risk.

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Re: U.S. stocks in freefall

Post by ogrehead » Sat Jan 23, 2016 1:00 am

This is the last I am going to respond to this...

HomerJ wrote:We probably agree more than we disagree... But you're wrong if you think Bogleheads are about assuming everything is going to work out great.

Please revisit the top of my post, the statement I was responding to:
CantPassAgain wrote:"If you hit the wrong period you are in trouble".....not really if you have a plan. And then stick with your plan.

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Re: U.S. stocks in freefall

Post by shelanman » Sat Jan 23, 2016 1:50 am

AndrewHMeador wrote:
shelanman wrote:Up-and-to-the-right always just feels so good in exactly the way that down-and-to-the-right just doesn't.


Down and to the left looks just the same as up and to the right! At least, when you're backtesting...


Yeah, I know. But "up and to the right" has a nice ring to it in precisely the same way that "down and to the left" doesn't :D

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Re: U.S. stocks in freefall

Post by shelanman » Sat Jan 23, 2016 2:06 am

lack_ey wrote:Just imagine if US returns were what emerging markets was the last 10 years:

Image

Negative after inflation. Well, it's happened for 16 years in the US, certainly much longer than that in other markets. And even Vanguard's relatively optimistic annual investment outlooks would put that at a ~15% chance or so for the next ten years here starting about today (the exact number is unclear because it falls between histogram bins).

Better be ready for anything, whether it's some more nosediving, a rebound, a whole lot of sideways, or whatever.


I'm not going to suggest that the same thing couldn't happen here (heck, the 1980s happened to Japan), but you do have to admit that that "emerging market" bucket includes a whole bunch of places with very un-free economies, with a very different set of risks. (When you buy an American company, you probably don't worry too much about whether the government will nationalize it, and you probably only worry a little bit about whether the government will decide to tell that company what prices it is allowed to charge or how much profit it can make -- but these are very commonplace occurrences in many of the "emerging" economies.) It shouldn't be terribly surprising when downturns in those regions turn especially ugly.

There's lots of money to be made in emerging markets, because there's so much room for growth that really needs nothing beyond some capital injection, reasonably sane management, and freedom from governmental interference (because of the huge amount of untapped/underutilized human capital) -- all of which tends to be available in good times. And when the bad times come, everybody remembers why it is that those countries aren't in the G8. If they were like developed economies, they'd be developed economies.

Of course, as ever, the markets could do absolutely anything from here. and one should understand the risk one takes.

I'm not sure how much I can really do to "be ready", though. Not investing in the market guarantees failure to achieve high-priority goals (like not having to rely on soup kitchens for meals when I'm too old to work), so I invest in the market, because it offers the best chance I've found. I wouldn't invest the way that I do if I could meet the goals without taking the risk. That old saw about risk tolerance seems funny to me, these days. I take more risk these days not because I want to, and not really because I can afford to, but because I can't afford to do otherwise.

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Re: U.S. stocks in freefall

Post by visualguy » Sat Jan 23, 2016 2:38 am

shelanman wrote:Not investing in the market guarantees failure to achieve high-priority goals (like not having to rely on soup kitchens for meals when I'm too old to work), so I invest in the market, because it offers the best chance I've found. I wouldn't invest the way that I do if I could meet the goals without taking the risk. That old saw about risk tolerance seems funny to me, these days. I take more risk these days not because I want to, and not really because I can afford to, but because I can't afford to do otherwise.


Good luck, but not sure why you think investing in the stock market is the best way. I've been investing in the stock market using a Bogle-like approach for 20 years. Also, I've owned a couple of rental properties plus my own home for over a decade. The real estate that I own generated much better returns than my stock market investments with much less volatility. Honestly, I'm not sure why I keep bothering with the stock markets - could have done better by buying a couple more properties with that money (although I can't do that with the 401(k) money...)

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Re: U.S. stocks in freefall

Post by Maynard F. Speer » Sat Jan 23, 2016 4:14 am

visualguy wrote:
shelanman wrote:Not investing in the market guarantees failure to achieve high-priority goals (like not having to rely on soup kitchens for meals when I'm too old to work), so I invest in the market, because it offers the best chance I've found. I wouldn't invest the way that I do if I could meet the goals without taking the risk. That old saw about risk tolerance seems funny to me, these days. I take more risk these days not because I want to, and not really because I can afford to, but because I can't afford to do otherwise.


Good luck, but not sure why you think investing in the stock market is the best way. I've been investing in the stock market using a Bogle-like approach for 20 years. Also, I've owned a couple of rental properties plus my own home for over a decade. The real estate that I own generated much better returns than my stock market investments with much less volatility. Honestly, I'm not sure why I keep bothering with the stock markets - could have done better by buying a couple more properties with that money (although I can't do that with the 401(k) money...)


It depends what the economy does over the next 20 years ..

You can see the see stock market and housing have generated similar long-term returns .. You can get lucky and buy property in the right area - but you can also get unlucky with property, and liquidity can be an issue .. (if you want a real premium for having your money tied up, you'd possibly do better in private equity or leveraged loans)

The risk would be if we entered a global deflationary period - which he haven't really had since the 1930s .. Property could be hit hard, and for a long period .. I don't think there's a perfect investment - but I think property should be a part of a balanced portfolio

Image
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Re: U.S. stocks in freefall

Post by Leeraar » Sat Jan 23, 2016 5:21 am

lack_ey wrote:So what's the reason our returns haven't been as good as Australia's or South Africa's?

Because you're not looking at them in USD?

http://www.xe.com/currencycharts/?from= ... SD&view=5Y

http://www.xe.com/currencycharts/?from= ... SD&view=5Y

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Re: U.S. stocks in freefall

Post by ogrehead » Sat Jan 23, 2016 10:02 am

visualguy wrote:Good luck, but not sure why you think investing in the stock market is the best way. I've been investing in the stock market using a Bogle-like approach for 20 years. Also, I've owned a couple of rental properties plus my own home for over a decade. The real estate that I own generated much better returns than my stock market investments with much less volatility. Honestly, I'm not sure why I keep bothering with the stock markets - could have done better by buying a couple more properties with that money (although I can't do that with the 401(k) money...)

Apples and oranges. I'vebeen an accidental landlord for longer than I'd like. Land lording done right is not a passive investment. It is subject to dramatic hyper local economic effects and risks as well as wider macroeconomic forces. It is more comparable to entrepreneurship than to passive investment of funds.

Now if you are investing in someone else's project that's entirely different. I would argue foolish, at least more than a small allocation to a large REIT fund. I have all the exposure I need in total market.

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Re: U.S. stocks in freefall

Post by BahamaMan » Sat Jan 23, 2016 10:43 am

visualguy wrote:Also, I've owned a couple of rental properties plus my own home for over a decade. The real estate that I own generated much better returns than my stock market investments with much less volatility.......................


Yup, that's a Job. Get another Job and you'll make even more money.

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Re: U.S. stocks in freefall

Post by CantPassAgain » Sat Jan 23, 2016 11:27 am

ogrehead wrote:Please revisit the top of my post, the statement I was responding to:
CantPassAgain wrote:"If you hit the wrong period you are in trouble".....not really if you have a plan. And then stick with your plan.


To be clear, I was responding to claims of being "in trouble" after following the boglehead philosophy for decades. I am assuming good health and full employment during the earning years. If you lose your job or get run over by a truck, that's got nothing to do with being a boglehead.

And yes maybe I could have worded that differently. "You will not really be in trouble if you have a plan that never bears to much or too little risk, takes social security and fixed income investments into account, and that considers annuitizing a portion of the portfolio for absolute needs above what social security would provide for etc etc and then stick to your plan" or something to that effect.

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Re: U.S. stocks in freefall

Post by visualguy » Sat Jan 23, 2016 3:22 pm

You don't get so many decades of meaningful investment...

When I look at my case, I would have been in trouble if my investments were entirely in the Boglehead strategy. Trouble in the sense of not reaching my retirement goals. It just didn't do well-enough over the period that I actually had a meaningful amount of money in it. I started about 20 years ago, and had meaningful money for maybe the last 10-15 years or so.

I'll retire probably in about 5-7 years. Close to zero chance of being able to do that without my real estate investments. I would have been able to retire now actually if the money I put in the Bogle strategy had been invested in buying more properties.

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Re: U.S. stocks in freefall

Post by fortyofforty » Sat Jan 23, 2016 4:10 pm

Isn't one of the problems with investing in Real Estate that you have to pick the right properties? It's like investing in individual stocks in that regard. Pick the wrong few and you're in big trouble. Pick the right few and you're on easy street. The "buy everything" strategy is a lot more "slow and steady" than this RE plan, isn't it?
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Re: U.S. stocks in freefall

Post by CoolHobieCat » Sat Jan 23, 2016 4:58 pm

Wifey and I are in our late 60s, have been retired for decades, have no children, no debt, and our income greatly exceeds our expenses. Our combined AA is about 90% Bonds and 10% Stocks, so the ups and downs off the equity market do not affect us very much. It has become more and more obvious to us that we have been far too conservative, so we decided to start spending more money. We ordered a red Porsche, and plan to take some day trips while we are still healthy. YOLO :happy

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Re: U.S. stocks in freefall

Post by Grogs » Sat Jan 23, 2016 6:51 pm

fortyofforty wrote:Isn't one of the problems with investing in Real Estate that you have to pick the right properties?


There's definitely that. Plus, a single property exposes you to a big risk from say losing 2 months rent to a bad tenant. That will probably wipe out any profit you may have made for the year. Plus you're in a single sector (e.g., single family home, office building, retail, etc), a single neighborhood, etc. In order to diversify you really need to have several different of types properties in different neighborhoods or even different cities.

An even bigger deal I think is the $$ cost to get started. One can buy into a VG target retirement fund for $1k and then add cash in $1 increments. In a 401k, you may not have to meet any initial minimum. For a single residential property, you're probably looking at anywhere from $10k - $1MM depending on the neighborhood. Commercial could be several times that. So buying several properties to diversify is beyond the means of most. Before 2008 you could buy one property in cash, then mortgage it and continue to leverage each additional property with the proceeds from the last until you had a pretty decent empire. Now it's just about impossible to get the financing to pull off that trick.

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Re: U.S. stocks in freefall

Post by GoldenFinch » Sat Jan 23, 2016 8:24 pm

CoolHobieCat wrote:Wifey and I are in our late 60s, have been retired for decades, have no children, no debt, and our income greatly exceeds our expenses. Our combined AA is about 90% Bonds and 10% Stocks, so the ups and downs off the equity market do not affect us very much. It has become more and more obvious to us that we have been far too conservative, so we decided to start spending more money. We ordered a red Porsche, and plan to take some day trips while we are still healthy. YOLO :happy


Nice! And I hope you spend some time on that Hobie Cat! :D

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Re: U.S. stocks in freefall

Post by ogrehead » Sat Jan 23, 2016 9:15 pm

fortyofforty wrote:Isn't one of the problems with investing in Real Estate that you have to pick the right properties? It's like investing in individual stocks in that regard. Pick the wrong few and you're in big trouble. Pick the right few and you're on easy street. The "buy everything" strategy is a lot more "slow and steady" than this RE plan, isn't it?

That's half of it, and the other half is that whatever time you invest in managing your real estate investments is labor. Returns on that labor should really be accounted as personal business earnings, not simply passive investment returns. If I'm taking phone calls from a tenant, banging on their door to collect rent, fixing a pipe, going to court to evict them, that's all part of the business. Unless you hire a property management company that does 100% of your work and decision-making for you are simply remits any proceeds or comes to ask for money when they need it, then it's not fair to compare returns to a REIT or an index fund. And it's next to impossible to make a dime as a small landlord without doing a lot of work yourself.

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Re: U.S. stocks in freefall

Post by HomerJ » Sat Jan 23, 2016 9:49 pm

visualguy wrote:You don't get so many decades of meaningful investment...

When I look at my case, I would have been in trouble if my investments were entirely in the Boglehead strategy. Trouble in the sense of not reaching my retirement goals. It just didn't do well-enough over the period that I actually had a meaningful amount of money in it. I started about 20 years ago, and had meaningful money for maybe the last 10-15 years or so.

I'll retire probably in about 5-7 years. Close to zero chance of being able to do that without my real estate investments. I would have been able to retire now actually if the money I put in the Bogle strategy had been invested in buying more properties.


I don't think you've done the math. You're saying that on a gut feeling.

Almost every cent you put into the market over the past 15 years is worth a lot more today.

The money you invested in Jan 2001 - has made 5% a year
The money you invested in Jan 2002 - has made 7% a year
The money you invested in Jan 2003 - has made 9% a year
The money you invested in Jan 2004 - has made 7% a year
The money you invested in Jan 2005 - has made 7% a year
The money you invested in Jan 2006 - has made 6% a year
The money you invested in Jan 2007 - has made 6% a year
The money you invested in Jan 2008 - has made 7% a year
The money you invested in Jan 2009 - has made 15% a year
The money you invested in Jan 2010 - has made 12% a year
The money you invested in Jan 2011 - has made 10% a year
The money you invested in Jan 2012 - has made 11% a year
The money you invested in Jan 2013 - has made 9% a year
The money you invested in Jan 2014 - has made 2% a year
The money you invested in Jan 2015 - has lost 7% this year

I'm not sure what you're expecting out of the stock market. Those are some pretty good numbers. Just by investing in Total Stock Market Index fund and "staying the course" through good times and bad. And 2000-2009 was considered by many at the time to be a "lost decade". Yet it still turned out pretty good in the "long-term".

I didn't have meaningful money in the stock market until about 15 years ago as well, and I'm well on track to retire in 5-8 years.

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Re: U.S. stocks in freefall

Post by lack_ey » Sat Jan 23, 2016 10:09 pm

Yeah, the last 15 years have not been bad for investing new money regularly into US stocks because of the run-up the last several years. If you stayed invested you did pretty well up through this point. Now, if stocks drop another 30% those numbers aren't going to look so great... but that hasn't happened yet and there's no reason to think it should (it might, with some probability, but wouldn't be typical).

Caveats are that both bear markets may have pushed up IRR for some contributions one the one hand, though on the other hand this period saw a decrease in valuations. Also, international stock returns were not as good.

Anyway, this is a big example of volatility helping out disciplined accumulators. Not as friendly for retirees, though.

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Re: U.S. stocks in freefall

Post by james22 » Sun Jan 24, 2016 2:01 am

wesgreen wrote:If you think of 16 years as a " very long period of time", Bogle's strategy probably isn't for you.


The time- and dollar-weighted investment horizon of a 25 year-old is only about 12 years.

http://www.pimco.com/LeftNav/Viewpoints ... 8-2007.htm


HomerJ wrote:But you're wrong if you think Bogleheads are about assuming everything is going to work out great.


You might want to review the Plan B thread (viewtopic.php?t=30085).

Some Bogleheads do believe everything will work out great if simply stay-the-course.
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Re: U.S. stocks in freefall

Post by ogrehead » Sun Jan 24, 2016 11:49 am

james22 wrote:
wesgreen wrote:If you think of 16 years as a " very long period of time", Bogle's strategy probably isn't for you.


The time- and dollar-weighted investment horizon of a 25 year-old is only about 12 years.

http://www.pimco.com/LeftNav/Viewpoints ... 8-2007.htm

Your link is broken. I found a similar document at PIMCO but not one that contains your assertions. However, consider the source. PIMCO manages bond funds. This is a bit like Ben & Jerry saying you should eat more ice cream.

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Re: U.S. stocks in freefall

Post by james22 » Mon Jan 25, 2016 3:42 am

Duration of Savings

To put the short time horizon of DC participants into perspective, we can analyze savings as we would a bond: as a series of annual cash flows with a maturity date.

For example, consider the scenario of a 25 year-old plan participant who earns $50,000 in her first year, gets a 1% real raise every year, and gradually increases her 401(k) contributions from 9.5% of salary in the first year to 13.3%3 of salary in the final year. As Table 1 shows, the “duration of savings” which represents the time- and dollar-weighted investment horizon of a 25 year-old participant is actually only about 12 years, not 40.

Participants who begin contributing later in life will have an even shorter effective time horizon. These individuals have a shorter, effective time horizon to “ride out” unfavorable volatility in their investments. Conventional wisdom of “buy and hold” therefore poses significant risks in a DC context.


viewtopic.php?t=16559

viewtopic.php?t=19339
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Re: U.S. stocks in freefall

Post by wesgreen » Mon Jan 25, 2016 10:23 am

Thank you for this, James22. Interesting way of looking at things, but maybe too complicated for my pea brain to really get the point. How would you say has this influenced your investing?

"Some Bogleheads do believe everything will work out great if simply stay-the-course."

Guilty as charged. At least, looking at the past, I like the odds over 30-plus years.

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Stay-they-course

Post by Taylor Larimore » Mon Jan 25, 2016 11:00 am

"Some Bogleheads do believe everything will work out great if simply stay-the-course."

Wesgreen:

It took awhile for me to understand, but "stay-the-course" has worked beautifully for me at age 92.

Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: U.S. stocks in freefall

Post by Christine_NM » Mon Jan 25, 2016 11:37 am

Participants who begin contributing later in life will have an even shorter effective time horizon.


To buy and hold you actually have to buy and then you will have something to hold. Those who do not save should not fault buy-and-hold, but themselves.
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Re: U.S. stocks in freefall

Post by nisiprius » Mon Jan 25, 2016 11:59 am

james22 wrote:The time- and dollar-weighted investment horizon of a 25 year-old is only about 12 years.

http://www.pimco.com/LeftNav/Viewpoints ... 8-2007.htm
...
That's a number I've wanted to know for a long time, and therefore am disappointed that that link seems to be broken. Can you find a better one?
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Re: Stay-they-course

Post by wesgreen » Mon Jan 25, 2016 12:50 pm

Taylor Larimore wrote:
"Some Bogleheads do believe everything will work out great if simply stay-the-course."

Wesgreen:

It took awhile for me to understand, but "stay-the-course" has worked beautifully for me at age 92.

Best wishes
Taylor


I know. Thank you for the inspiration. Couldn't have done it without you.
Best wishes,
Wesgreen

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Re: U.S. stocks in freefall

Post by dl42 » Tue Jan 26, 2016 12:10 am

nisiprius wrote:
james22 wrote:The time- and dollar-weighted investment horizon of a 25 year-old is only about 12 years.

http://www.pimco.com/LeftNav/Viewpoints ... 8-2007.htm
...
That's a number I've wanted to know for a long time, and therefore am disappointed that that link seems to be broken. Can you find a better one?


There's an archive of the link at the wayback machine:

http://web.archive.org/web/20100706123425/http://www.pimco.com/LeftNav/Viewpoints/2007/Glidepath+Executive+Summary-+8-2007.htm

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Re: U.S. stocks in freefall

Post by lack_ey » Tue Jan 26, 2016 12:28 am

Leeraar wrote:
lack_ey wrote:So what's the reason our returns haven't been as good as Australia's or South Africa's?

Because you're not looking at them in USD?

http://www.xe.com/currencycharts/?from= ... SD&view=5Y

http://www.xe.com/currencycharts/?from= ... SD&view=5Y

L.

Wait, what are you trying to show?

To clarify, I was talking about long-run returns, like 100+ years.

This was in response to the idea that the US historical return is typical and other countries' returns will increase from what they experienced in the past, perhaps in part because of bad luck from war and other causes.

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Re: U.S. stocks in freefall

Post by james22 » Tue Jan 26, 2016 12:33 am

wesgreen wrote:Thank you for this, James22. Interesting way of looking at things, but maybe too complicated for my pea brain to really get the point. How would you say has this influenced your investing?


The buy-and-hold investor need not contend with just the "fear factor," wesgreen, but actual *risk* as the market can remain low longer than the buy-and-hold investor can remain solvent. And that risk is higher the shorter one's duration of savings.

(Addressing the risk requires recognizing valuation, of course, and that way madness lies.)


Taylor Larimore wrote:It took awhile for me to understand, but "stay-the-course" has worked beautifully for me at age 92.


How'd viewtopic.php?t=30085 work out for you, Taylor?

In the thread I wrote:

james22 wrote:
SoonerSunDevil wrote:I have never, ever, ever heard of this notion of calculating a stop-loss value in which it's appropriate to bail out of stocks and go 100% bonds. I've never heard any "Boglehead" authority say anything of the sorts until now, in the midst of the worst bear market since the Depression.


1. You've never heard something like “If you cannot afford to lose another penny, then you simply have no recourse but to get out of the stock market” (Bogle)?

2. Or if something like "If you have the ability to ride out the current market storms, [stay the course]..." (Bogle), did you not read it as also suggesting a course of action if without the ability?

3. DID YOU REALLY NEED TO BE HEAR SUCH A THING??


I'm convinced now some need to hear it.


nisiprius wrote:That's a number I've wanted to know for a long time, and therefore am disappointed that that link seems to be broken. Can you find a better one?


Sorry, nisipruis, I've not been able to find a good link.

But it'd be good to confirm: Sum(TimeToCashFlow * PresentValueOfCashFlow) / Sum(PresentValueOfCashFlow)
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Re: U.S. stocks in freefall

Post by HomerJ » Tue Jan 26, 2016 3:21 pm

lack_ey wrote:
Leeraar wrote:
lack_ey wrote:So what's the reason our returns haven't been as good as Australia's or South Africa's?

Because you're not looking at them in USD?

http://www.xe.com/currencycharts/?from= ... SD&view=5Y

http://www.xe.com/currencycharts/?from= ... SD&view=5Y

L.

Wait, what are you trying to show?

To clarify, I was talking about long-run returns, like 100+ years.

This was in response to the idea that the US historical return is typical and other countries' returns will increase from what they experienced in the past, perhaps in part because of bad luck from war and other causes.


Well, neither Australia or South Africa was bombed to rubble during World War II either.

I just wonder if/how World War II is accounted for when people show Europe's long-term stock market returns to be lower than the U.S.

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Re: U.S. stocks in freefall

Post by lack_ey » Tue Jan 26, 2016 4:02 pm

HomerJ wrote:Well, neither Australia or South Africa was bombed to rubble during World War II either.

Okay, how about Canada, New Zealand, Portugal, Sweden, Switzerland, etc., which have had lower returns? They were unlucky, Australia and South Africa were lucky, and the US got about the typical amount?

In any case, the data we do have is subject to survivorship bias.


HomerJ wrote:I just wonder if/how World War II is accounted for when people show Europe's long-term stock market returns to be lower than the U.S.

Of course not. How would you even quantify the difference, and where would you even stop with the corrections? It would be wishy washy and nobody would agree with the results.

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Re: U.S. stocks in freefall

Post by nisiprius » Tue Jan 26, 2016 4:15 pm

dl42 wrote:
nisiprius wrote:
james22 wrote:The time- and dollar-weighted investment horizon of a 25 year-old is only about 12 years.

http://www.pimco.com/LeftNav/Viewpoints ... 8-2007.htm
...
That's a number I've wanted to know for a long time, and therefore am disappointed that that link seems to be broken. Can you find a better one?


There's an archive of the link at the wayback machine:

http://web.archive.org/web/20100706123425/http://www.pimco.com/LeftNav/Viewpoints/2007/Glidepath+Executive+Summary-+8-2007.htm
I was about to give you my hearty thanks, and I still will... except that I do not see any reference to the "time- and dollar-weighted investment horizon of a 25-year-old is only about 12 years" on that page. Although I do see "Participants save the bulk of their retirement assets in their later years, thus the investment horizon is shorter than many may think."

Oh, wait, it's in the full study, which is also available at archive.org.

And also here:
http://media.pimco-global.com/pdfs/pdf/ ... depath.pdf

Image

Wow.

That doesn't quite feel right to me... my own contributions, I'm pretty sure, were bimodal. Actually built a very important foundation in my earlier earnings years, slacked off when we acquired kids, a mortgage, and college tuition expenses, then increased again. Too bad they don't give a source or say where the data came from.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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