Who takes financial chances and why is this forum so financially conservative?

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dbr
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Re: Who takes financial chances and why is this forum so financially conservative?

Post by dbr » Wed Jun 14, 2017 9:42 am

takeshi wrote:
ThankYouJack wrote:Maybe it's just me, but it seems like this forum is getting more financially conservative.

Be careful assuming trends based on forum posts on any discussion forum site on any topic. Post can easily skew perception. Take technical discussion, fora for example. People post when they have problems which makes those who don't consider their data sources easily think that there are nothing but problems. This site certainly has skewing just as any other discussion forum.


That is very true. A cross section of what participants on this forum actually do would be very different from a cross section of what is posted. For whatever reason the Forum team decided to eliminate the ability to post polls. Even then polls could also be misleading.

As to conservative, I would read that as it being fashionable on the forum these days to hear a lot of wailing and gnashing of teeth about expecting the worst from future returns and there being a lot of anxiety about retirement. It may be a generational thing.

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by Vanguard Fan 1367 » Wed Jun 14, 2017 10:25 am

dbr wrote:
takeshi wrote:
ThankYouJack wrote:Maybe it's just me, but it seems like this forum is getting more financially conservative.

Be careful assuming trends based on forum posts on any discussion forum site on any topic. Post can easily skew perception. Take technical discussion, fora for example. People post when they have problems which makes those who don't consider their data sources easily think that there are nothing but problems. This site certainly has skewing just as any other discussion forum.


That is very true. A cross section of what participants on this forum actually do would be very different from a cross section of what is posted. For whatever reason the Forum team decided to eliminate the ability to post polls. Even then polls could also be misleading.

As to conservative, I would read that as it being fashionable on the forum these days to hear a lot of wailing and gnashing of teeth about expecting the worst from future returns and there being a lot of anxiety about retirement. It may be a generational thing.


The news has always been bad, not discussing politics at all. The market is at an all time high, PE ratio is relatively high and dividend yield is pretty low. Bond interest rate is super low. You can't blame folks for having some concerns about retirement. I don't think Jack Bogle is off the wall predicting 4 percent returns going forward.

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by dbr » Wed Jun 14, 2017 10:57 am

Vanguard Fan 1367 wrote:
The news has always been bad, not discussing politics at all. The market is at an all time high, PE ratio is relatively high and dividend yield is pretty low. Bond interest rate is super low. You can't blame folks for having some concerns about retirement. I don't think Jack Bogle is off the wall predicting 4 percent returns going forward.


If you are 30-40 years old today, you are looking at a future of 60-70 years. Even a 60 year old looking at retirement now needs to think of the next 30 or 40 years. Those are long times into the future to be worried about the PE and the interest rate today. It really does come down to the news is always bad. I think it is a pretty good bet that the actual problems that will be faced by today's 30 year old or today's 60 year old have not even been guessed yet.

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by 3CT_Paddler » Wed Jun 14, 2017 11:44 am

The responses only reinforce that this forum is financially conservative... that is not a bad thing, but I don't think many people like that label.

I think financial/career risk are taking chances on businesses/jobs/careers for which the outcome is very uncertain or there is no roadmap on how to get it done. Investing in stocks is not evidence that you are a financial risk taker... even very conservative investors recommend including stocks in their portfolio. Becoming a doctor and opening a practice after learning under someone is far from a risky venture. Starting a new business that has a decent chance of failing is financial risk taking.

The group of people who are taking the big risks by starting a business (especially ones that require investment in actual capital) are typically not going to join this forum until they have cashed out of their venture as they get close to retirement. It shows up in who posts on here - lots of engineers, lawyers, accountants, doctors and other white collar professionals who also typically have access to a company 401k.

This is speaking as someone who is in the financially conservative white collar contingent.

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by ThankYouJack » Wed Jun 14, 2017 11:49 am

Thanks all for the responses. I haven't been able to go through them all yet (but I will) and appreciate the feedback.

By conservative, I mostly mean around safe withdrawal rates. I've been on here for a while and I originally thought 25x was enough, then 33x becomes the trend, and now 50x seems more popular for early retires. I don't want to be consumed with concern that the more I accumulate, the more I can lose. I want to feel that the more I accumulate the greater life-style changes I can take. My spouse and I have both been very fortunate job wise, are frugal LBYMers and feel our human capital is high, so that definitely adds to a high feeling of security.

bottlecap wrote:Well, you didn't take much of a chance, either. Quitting a job when you are young is not exactly a huge risk. Nor is scaling back your employment.



Well, I literally just had a few thousand in my bank account, my net worth was about negative $20k (student loans), I didn't have my parents or anyone to fall back on, I had no health insurance and was jumping off 50+ cliffs and swimming in some large surf. I was young and dumb, but having fun :)

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by bligh » Wed Jun 14, 2017 12:00 pm

ThankYouJack wrote:By conservative, I mostly mean around safe withdrawal rates. I've been on here for a while and I originally thought 25x was enough, then 33x becomes the trend, and now 50x seems more popular for early retires. I don't want to be consumed with concern that the more I accumulate, the more I can lose. I want to feel that the more I accumulate the greater life-style changes I can take.


My understanding is that 25x has historically been enough in almost all cases. 33x has never failed. Personally I would consider myself fully FI @ 25x in my portfolio (ie. NOT net worth)...Anyway, A lot will depend on the actual asset allocation, sequence of returns and how much control you have over your expenses. But the past does not predict the future, and there are no guarantees in life. Careers end too early, health deteriorates too quickly, you live a lot longer than you planned for. Economies collapse. Wars happen. Deflations happen. Hyperinflation happens. Revolutions happen. Record, once in a generation bull markets happen. Windfalls happen. You just roll with the punches, you plan with a margin of safety. What you see on here is people figuring out what that margin of safety looks like for them.

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by bigred77 » Wed Jun 14, 2017 12:03 pm

My perception of this board is that it's pretty darn conservative. That's fine most of the time, being financially conservative is a prudent choice. You definitely lower your chances of getting in trouble. Sometimes however, I think the advice some posters get is so over the top conservative that it actually has negative consequences. Some of the sub 3% withdrawal rates and property buying advice come to mind. There are a lot of reasonable strategies out there that would be considered reckless by the majority on this board (IMO).

I personally have made some aggressive choice since I started making a full time income. I don't like classifying them as "financial chances" because I like to think they are well though out (hopefully) decisions made on logic and reason, albeit they come with a higher risk profile . I like to think of myself as responding appropriately to incentives and attempting to use my money as efficiently as possible.

I've never put 20% down on either property that I've bought.
I've never had an emergency fund or even taxable investment assets beyond cash in a savings account under 10k (basically a sinking fund).
In my 20's I had a peak debt balance of 525k with a household income of 130k-140k (excluding RSUs and bonus income).

I'd classify the above as fairly aggressive but everything worked out well. I know there are alternative scenarios where the downside risk could have showed up and things wouldn't be so rosy right now, as is the uncertainty with any decision. As I get older and my circumstances change, my attitude towards certain things has changed along with it (I'm thinking about how I value liquidity specifically, I'm trying to build some cash reserves over the next year). I still don't have any issues using debt strategically, especially when young, while taking downside risk into account. I would be comfortable with a 3% withdrawal rate at any age and 4% withdrawal rate once I reach 50+. I think when compared to the general population I would be considered conservative. I think compared to the boglehead population I would not.

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by itstoomuch » Wed Jun 14, 2017 1:04 pm

Opinion, OP.
The perceived investing for/near/in retirement matters a lot, plus how how good is the FR, plus how secure is that FR.
Since most BH don't post their positions, the casual reader gets the impression of fiscal conservatism.
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Re: Who takes financial chances and why is this forum so financially conservative?

Post by ThankYouJack » Wed Jun 14, 2017 7:05 pm

takeshi wrote:
ThankYouJack wrote:Maybe it's just me, but it seems like this forum is getting more financially conservative.

Be careful assuming trends based on forum posts on any discussion forum site on any topic. Post can easily skew perception. Take technical discussion, fora for example. People post when they have problems which makes those who don't consider their data sources easily think that there are nothing but problems. This site certainly has skewing just as any other discussion forum.

Even if this forum is becoming more financially conservative why would it matter? You should be doing what works best for you, not just following the herd. Others are doing whatever it is they think is best for them for whatever reasons whether or not their priorities are in line with your own.


I would like to think that I have all the answers in life, but I am influenced by my friends and the people around me. I am continually learning.
(aren't we all)

This forum is my main place for almost all financial advice. But when reading posts about people having financial fear in incredible situations, I look at my own great situation and think - if so many are concerned, should I be even more concerned? To me that seems like human nature.

What I'll probably do is read more from John Bogle himself, possibly reach out to Vanguard for financial advice, and visit one or two other forums (like an early retirement one).

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by *3!4!/5! » Thu Jun 15, 2017 2:51 pm

There's a contrast to be made.

Having ten years salary invested in the stock market is one kind of risk.

Retiring early and forgoing ten years salary is a different kind of risk.

The first kind you can just stay the course and not think about it too much. The second kind you really need to think about, as it's a pretty big decision.

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by Fallible » Thu Jun 15, 2017 5:55 pm

takeshi wrote:
ThankYouJack wrote:Maybe it's just me, but it seems like this forum is getting more financially conservative.

Be careful assuming trends based on forum posts on any discussion forum site on any topic. Post can easily skew perception. Take technical discussion, fora for example. People post when they have problems which makes those who don't consider their data sources easily think that there are nothing but problems. This site certainly has skewing just as any other discussion forum. ...


Agree. Generalizing about the forum would likely be based on those who post frequently, not necessarily a representative sample of Bogleheads overall. Often, when an OP provides specifics, replies can be more meaningful. In this case, the OP has added that his concern is centered on safe withdrawal rates, which brings the topic into better focus.
Bogleheads® wiki | Investing Advice Inspired by Jack Bogle

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by ThankYouJack » Fri Jun 16, 2017 6:02 am

Fallible wrote:
takeshi wrote:
ThankYouJack wrote:Maybe it's just me, but it seems like this forum is getting more financially conservative.

Be careful assuming trends based on forum posts on any discussion forum site on any topic. Post can easily skew perception. Take technical discussion, fora for example. People post when they have problems which makes those who don't consider their data sources easily think that there are nothing but problems. This site certainly has skewing just as any other discussion forum. ...


Agree. Generalizing about the forum would likely be based on those who post frequently, not necessarily a representative sample of Bogleheads overall. Often, when an OP provides specifics, replies can be more meaningful. In this case, the OP has added that his concern is centered on safe withdrawal rates, which brings the topic into better focus.


I realize it's a generalization. I guess instead of saying "this forum" I could have said "posts on this forum". It may also be me changing as the more I accumulate, the more freeing I want it to be.

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by nisiprius » Fri Jun 16, 2017 7:05 am

This forum is entitled "Investing Advice Inspired by Jack Bogle." In "The Little Book of Common Sense Investing," he wrote:
In 'The Little Book of Common Sense Investing' wrote:My favorite rule of thumb is (roughly) to hold a bond position equal to your age--20 percent when you are 20, 70 percent when you're 70, and so on--or maybe even your age minus 10 percent. There are no hard-and-fast rules here. (Most experts think my guidelines are too conservative. But I am conservative).
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Re: Who takes financial chances and why is this forum so financially conservative?

Post by MrNewEngland » Fri Jun 16, 2017 8:36 am

I don't think the Boglehead way is conservative at all... it's not flashy, but that doesn't make it conservative.

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by Ron Ronnerson » Fri Jun 16, 2017 8:52 am

We bought a home that was $500k on a combined income of $110k with 3% down (didn't have to pay PMI, though). At the time, my wife and I were both uncertain about our job security. We did a budget and it seemed that we could afford it even though it might be tight. We were frugal and there were no kids in the picture at the time. This was in 2009. We got lucky and didn't lose our jobs during the recession even though my wife and I were both working harder for lower pay for a few years.

In 2012, we were able to refinance at a 2% lower rate and that dropped the monthly mortgage payment a decent amount. In the meantime, our income has gone up to $150k and we now have over 50% equity in the home, mostly due to appreciation. The after-tax cost of our mortgage payment, property taxes, and HOA is about the same cost as the current price of rent on the apartment we used to live in (and the apartment was much smaller and not located in as nice an area). Ignoring all the recommended ratios on home affordability turned out great for us. Our family of three lives in a pretty big home in a great neighborhood with excellent schools in the Bay Area at a reasonable cost. Leaping when we were afraid turned out to be good. Of course, it could have been disastrous, too.

We were also 100% equities until age 40 (2015). That worked out well too. That, too, could have been bad.

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by ThankYouJack » Fri Jun 16, 2017 9:28 am

nisiprius wrote:This forum is entitled "Investing Advice Inspired by Jack Bogle." In "The Little Book of Common Sense Investing," he wrote:
In 'The Little Book of Common Sense Investing' wrote:My favorite rule of thumb is (roughly) to hold a bond position equal to your age--20 percent when you are 20, 70 percent when you're 70, and so on--or maybe even your age minus 10 percent. There are no hard-and-fast rules here. (Most experts think my guidelines are too conservative. But I am conservative).


I couldn't agree more with Jack Bogle's investing advice. Along with his investing advice, as a person he's very courageous, relaxed, completely satisfied that he has Enough (https://www.amazon.com/Enough-True-Meas ... gle+enough) - to me those qualities are much more important than having X in bonds. IMO, the having "enough" part often seems overlooked on here and I believe that is because of excessive worry.

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by Elsebet » Fri Jun 16, 2017 5:02 pm

I've taken a lot of risks in life, but consider myself fairly conservative financially now at age 40. Part of it is due to having what I call a "farm wife" mentality and feeling reassured at having a well-stocked pantry; I take that into my finances as well. Part of it is due to having made a lot of mistakes in my youth and being sensitive to that now. Part of it is due to being raised by a frugal/LBYM father who didn't take chances with finances.

Here are some risks and/or mistakes in my life:

- drove out to college in a rented van with no car of my own, no job, and $500 total to my name, and my first month's subsidized rent was $250 - I'm still not entirely sure how I made it through college sometimes, it was hairy

- took a job in another city and left an empty house on the market (did this twice) - paid for the house until it sold AND a rental - one of those was just for a contract-to-hire job that I almost didn't get hired for, scary time

- ran up tons of credit card debt in my 20's, paid it all off and vowed "never again!"

Feel free to take as much risk as you desire with YOUR money. :)

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by afan » Fri Jun 16, 2017 5:30 pm

ThankYouJack wrote:IMO, people should also have some FOMO (fear of missing out). I'm not going to be on my death bed wishing that I had gone to more meetings or spent more time with work emails.


In my case, the answer is simple. I have known myself long enough to know what I like and the many entertainments to which I am indifferent. There are lots of things that many people spend huge amounts of time and money pursuing that I would not cross the street for if they were free. So I am not "missing out". I am "not interested". Fancy cars, dining, jewelry, cars, clothes, travel... I don't want that. I would not go there, wear that, eat that, drive that, whatever, if it were free. I would not buy it if I had 10 x my networth. No more than I would start smoking cigarettes. They are something I could buy that I do not want.

I am not on my death bed yet, but my regrets actually do revolve around not being more successful. Not having accomplished as much professionally as I would have hoped. So far, leaving too much on the table. At this point in my life my career trajectory is pretty well set. I am successful by most measures, but there are people in my field who have done better. I do spend a lot of free time, weekends and vacations catching up on things I did not get done during the week. The notion that my work day ends when I leave the office is completely alien.

By most measures I have ample reserves to retire now with way more than 25X annual expenses socked away. But I plan to work as long as I can. The longer I work the less it matters how much money I have saved. If I die at my desk then I will never have been in the situation of living off retirement income. That is by far the safest route.

I don't like my job, but I like my paycheck. I like saving money. I dislike spending money and I HATE the thought of spending investment income, let alone dipping into capital.

I don't have anywhere expensive or time consuming I want to go and I don't have anything expensive I want to buy. So my main FOMO is fear of missing out of earning, saving and investing opportunities.

To get me to quit my job and go travelling the world you would have to draft me, kidnap me, or hold a gun to my head.
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Re: Who takes financial chances and why is this forum so financially conservative?

Post by *3!4!/5! » Fri Jun 16, 2017 5:36 pm

OP, did you have any specific questions?

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by Pinotage » Fri Jun 16, 2017 5:45 pm

afan wrote:If I die at my desk then I will never have been in the situation of living off retirement income. That is by far the safest route.

I don't like my job, but I like my paycheck. I like saving money. I dislike spending money and I HATE the thought of spending investment income, let alone dipping into capital.


Wow. That is a very intense set of ideals.

Discussions like these sometimes weigh on my mind as I consider advice offered (without this context) in other threads.

I do think that being overly conservative (2% SWR, only buy a house if you can pay cash, etc...) can ultimately be very limiting. It is impossible to manage all risk. Attempting to do so costs lots of time, money, and opportunity.

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by ThankYouJack » Fri Jun 16, 2017 6:31 pm

*3!4!/5! wrote:OP, did you have any specific questions?


Well now I'm wondering what Jack Bogle's thoughts are on having enough to retire. Maybe he doesn't broach the subject much because it's such a personal topic and decision and depends on many factors.


afan wrote:
ThankYouJack wrote:IMO, people should also have some FOMO (fear of missing out). I'm not going to be on my death bed wishing that I had gone to more meetings or spent more time with work emails.


In my case, the answer is simple. I have known myself long enough to know what I like and the many entertainments to which I am indifferent. There are lots of things that many people spend huge amounts of time and money pursuing that I would not cross the street for if they were free. So I am not "missing out". I am "not interested". Fancy cars, dining, jewelry, cars, clothes, travel... I don't want that. I would not go there, wear that, eat that, drive that, whatever, if it were free. I would not buy it if I had 10 x my networth. No more than I would start smoking cigarettes. They are something I could buy that I do not want.

I am not on my death bed yet, but my regrets actually do revolve around not being more successful. Not having accomplished as much professionally as I would have hoped. So far, leaving too much on the table. At this point in my life my career trajectory is pretty well set. I am successful by most measures, but there are people in my field who have done better. I do spend a lot of free time, weekends and vacations catching up on things I did not get done during the week. The notion that my work day ends when I leave the office is completely alien.

By most measures I have ample reserves to retire now with way more than 25X annual expenses socked away. But I plan to work as long as I can. The longer I work the less it matters how much money I have saved. If I die at my desk then I will never have been in the situation of living off retirement income. That is by far the safest route.

I don't like my job, but I like my paycheck. I like saving money. I dislike spending money and I HATE the thought of spending investment income, let alone dipping into capital.

I don't have anywhere expensive or time consuming I want to go and I don't have anything expensive I want to buy. So my main FOMO is fear of missing out of earning, saving and investing opportunities.

To get me to quit my job and go travelling the world you would have to draft me, kidnap me, or hold a gun to my head.


Thanks for sharing. We differ quite a bit on opinion and hobbies - I don't like expensive things either but am willing to spend a good amount on my hobbies and food. I think way too many people define success as what they do for a living. I personally define success as the impact I can have on people, and not based on my career or how much money I have. Regardless, you're making a solid impact by working your tail off, since you're paying taxes, not wasting, and I assume will be leaving behind quite a large estate. So thanks for the hard work and making me feel lazy and selfish :wink:

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by JonnyDVM » Fri Jun 16, 2017 7:53 pm

Agree with your opinion on SWR and I've brought it up many times to the point where I've stopped reading SWR threads. The super conservative SWR folk are going to wind up working longer/harder and leaving a huge ball of money behind. Opportunity cost to the max. To the inevitable "well what if I go broke?" response- my answer is if you're that scared buy an annuity. It'll pay you better than your super conservative SWR.

If you want to manage your retirement with a planned 2% SWR fine. But I think telling others to do the same is bad advice.
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Re: Who takes financial chances and why is this forum so financially conservative?

Post by delamer » Fri Jun 16, 2017 8:05 pm

JonnyDVM wrote:Agree with your opinion on SWR and I've brought it up many times to the point where I've stopped reading SWR threads. The super conservative SWR folk are going to wind up working longer/harder and leaving a huge ball of money behind. Opportunity cost to the max. To the inevitable "well what if I go broke?" response- my answer is if you're that scared buy an annuity. It'll pay you better than your super conservative SWR.

If you want to manage your retirement with a planned 2% SWR fine. But I think telling others to do the same is bad advice.



But doesn't this issue -- like some many others on the forum -- come down to the level of assets involved?. It is understandable why someone with a $500,000 nest egg might want to have a conservative withdrawal rate. For someone with $5,000,000, it is unnecessarily limiting.

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by *3!4!/5! » Fri Jun 16, 2017 8:49 pm

*3!4!/5! wrote:There's a contrast to be made.

Having ten years salary invested in the stock market is one kind of risk.

Retiring early and forgoing ten years salary is a different kind of risk.

The first kind you can just stay the course and not think about it too much. The second kind you really need to think about, as it's a pretty big decision.


Like others, I too have lost interest in the SWR discussions. But, I'll reiterate where the real instant of risk is. It's the moment you quit that safe job (with little prospect of getting back in) to retire early, and 10+ years of potential income (human capital) is instantly vaporized.

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by Vanguard Fan 1367 » Fri Jun 16, 2017 11:41 pm

I haven't read Jack's book, Enough. I wonder if he broaches the subject of how much you need to retire there?

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by WiscoTrout » Sat Jun 17, 2017 1:34 am

By its very nature, this forum is composed of people who are fiscally conservative. And that means discussions of mitigating downside risk, living below your means, and saving for a better future. I agree there is a contingent who go a bit overboard on things like SWR (2.5% is the new 4%!) based upon little more than speculative fears about an unknown future.

However, there is also a large group of folks who are comfortable with their assets and their allocations, and have a more pragmatic outlook. They also tend to be a more silent majority, with only occasional responses of "Stay the course!", versus long diatribes full of the minutiae of worry.

All that said, in comparison with the average adult, the whole forum is VERY conservative, especially when the majority of Americans have less than $1000 in savings and little more planned for retirement than Social Security.

I fall in the more pragmatic group, but I have to admit I sometimes get nervous reading some of the Doom and Gloomer posts. I just have to tune out some of them the same way I tune out people like Jim Cramer on the other end of the spectrum.

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by SGM » Sat Jun 17, 2017 3:25 am

Those who don't have sufficient income streams in retirement or very large portfolios are necessarily conservative when it comes to safe withdrawal rates. I also think that fear of large medical costs might cause many to choose a lower SWR.

I don't think most BHs are too conservative when I compare them to the generation that grew up in the great depression. Many of them remained fearful of banks and the stock market throughout their lives.

I have taken some large financial chances, but have never made the serious mistakes that I read so much about. Early on I saw others make some of those mistakes and learned lessons through observation. I think that the chances I took allowed me to prosper. There is always an aspect of luck, but sometimes you make your own luck through preparation and hard work.

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by in_reality » Sat Jun 17, 2017 3:55 am

ThankYouJack wrote:I'm not sure what direction this thread will go (my guess is it may get locked), but my family is considering taking additional chances and wondering if the responses will entice or scare us from taking them


I think risk management is inherently conservative.

At one of the worlds largest financial institutions, a relationship manager once told me they appreciated the risk assessments the the risk manager would do.

Of course, the country manager always had final say on the decision after listening to those often opposing views, but the relationship manager's point was that it's easier to take action when one is pretty sure all the risks have been dutifully considered.

I think you, ThankYouJack, should be the decision maker with your own money after considering the information available to you. Whether responses entice or scare you isn't as important as understanding your own reasons for a particular course of action in light of the information you have, and your own particular risk appetite and desires.

In any case, the risk manager I knew best absolutely bristled with indignation, resentment and fear when an attempt was made to quiet their opinion before 2008 when they were voicing an opinion that too much risk was often being taken. That's when risk management fails. Not when risks are brought up and highlighted too much.

If views are too conservative in your opinion, you should feel free to disregard them and judge for yourself.
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Re: Who takes financial chances and why is this forum so financially conservative?

Post by Lancelot » Sat Jun 17, 2017 4:49 am

Well it depends :D

When I was married I had other people depending on me- so I couldn't quit my job and pursue my passion, which is travel. After a divorce, I decided to go for it. I walked away from a good salary, but I've never regretted it.

I am comfortable rolling the dice when I'm only responsible for myself.
No Where for Very Long...

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by JonnyDVM » Sat Jun 17, 2017 9:27 pm

delamer wrote:
JonnyDVM wrote:Agree with your opinion on SWR and I've brought it up many times to the point where I've stopped reading SWR threads. The super conservative SWR folk are going to wind up working longer/harder and leaving a huge ball of money behind. Opportunity cost to the max. To the inevitable "well what if I go broke?" response- my answer is if you're that scared buy an annuity. It'll pay you better than your super conservative SWR.

If you want to manage your retirement with a planned 2% SWR fine. But I think telling others to do the same is bad advice.



But doesn't this issue -- like some many others on the forum -- come down to the level of assets involved?. It is understandable why someone with a $500,000 nest egg might want to have a conservative withdrawal rate. For someone with $5,000,000, it is unnecessarily limiting.


The SWR is the same % regardless of your nest egg. The math works the same. So the owner of a 500k portfolio (invested appropriately) can withdrawal 20k/yr plus they'll have social security. Not bad compared to most of America. The risk of ruin (which is tiny) is the same as any other sized portfolio withdrawing the same 4%.

Regardless, I'm sure there's a lesson in here about how the forum shades conservative. Most members in this forum have done pretty well for themselves and they didn't do it by being wildly speculative.
Sometimes the questions are complicated and the answers are simple. -Dr. Seuss

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by delamer » Sat Jun 17, 2017 9:51 pm

JonnyDVM wrote:
delamer wrote:
JonnyDVM wrote:Agree with your opinion on SWR and I've brought it up many times to the point where I've stopped reading SWR threads. The super conservative SWR folk are going to wind up working longer/harder and leaving a huge ball of money behind. Opportunity cost to the max. To the inevitable "well what if I go broke?" response- my answer is if you're that scared buy an annuity. It'll pay you better than your super conservative SWR.

If you want to manage your retirement with a planned 2% SWR fine. But I think telling others to do the same is bad advice.



But doesn't this issue -- like some many others on the forum -- come down to the level of assets involved?. It is understandable why someone with a $500,000 nest egg might want to have a conservative withdrawal rate. For someone with $5,000,000, it is unnecessarily limiting.


The SWR is the same % regardless of your nest egg. The math works the same. So the owner of a 500k portfolio (invested appropriately) can withdrawal 20k/yr plus they'll have social security. Not bad compared to most of America. The risk of ruin (which is tiny) is the same as any other sized portfolio withdrawing the same 4%.

Regardless, I'm sure there's a lesson in here about how the forum shades conservative. Most members in this forum have done pretty well for themselves and they didn't do it by being wildly speculative.


My point was that someone with a $500,000 nest egg might be concerned about possible future medical or long-term care bills, and so want to conserve assests by having a lower SWR. While as someone with $5 million as less need to worry about not being able to cover such costs and can do a higher SWR.

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by Mudpuppy » Sun Jun 18, 2017 12:44 am

Probably my biggest financial chance was going back to graduate school during the height of the dot-com boom. I left what would now be called a "DevOps" job (sysadmin + programmer) with decent pay and very good benefits to go another $50k in student loan debt for my Ph.D. in Computer Science. Of course, when the dot-com busted, several of my previous co-workers tried to do the same but found it was much harder to get into grad school (limited spaces, but many more applicants).

And this did lead to my current job, which has good pay and very good benefits, and is close to some elderly family members who need additional help. Could I have made more for the likes of Google? Most surely. But I'm not the "hop on the plane at the first sign of trouble" sort, so I like my servers to be in one geographic area instead of spread across the country / globe. Although, when I do hop on a plane, I can now wear the Thinkgeek "not that kind of doctor" t-shirt.

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by peterinjapan » Sun Jun 18, 2017 4:14 am

I am 49 years old (well, in three days) yet I am 90% equities (mostly domestic). I figure this is okay because my other "anchor" investments are

a) three properties in San Diego which are all doing well and generating rental income which nicely cover the mortgage payment.
b) a lot of social security coming
c) 401(k) of $300k
d) super conservative Japanese wife who loves to save cash at 0.00015% interest rate
e) wife also does weird random investments like Azerbaijani bonds yielding 12% and a new investment in a resort for Chinese tourists in Cambodia, which will be sold to other investors after it's developed partially.

Thus I feel pretty good about my too-many-stocks position, holding very few bonds.

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by Valuethinker » Sun Jun 18, 2017 7:26 am

nisiprius wrote:This forum is entitled "Investing Advice Inspired by Jack Bogle." In "The Little Book of Common Sense Investing," he wrote:
In 'The Little Book of Common Sense Investing' wrote:My favorite rule of thumb is (roughly) to hold a bond position equal to your age--20 percent when you are 20, 70 percent when you're 70, and so on--or maybe even your age minus 10 percent. There are no hard-and-fast rules here. (Most experts think my guidelines are too conservative. But I am conservative).


Mandelbrot was a real eye opener for me, re volatility of financial markets, in particular stocks.

Stock market volatility is far higher than we have been led to believe. Where we have long run historic data such as daily cotton prices in Egypt since the 1500s, and housing prices in Netherlands since 1630s (also Paris, somewhat less precision, since 1300s) and developed countries (especially US, Australia, UK) since 1800s, asset price returns do not appear to be Normally distributed (Gaussian). In fact they are fractal.

Thus, the risk of a serious loss of value in the stock market, which cannot be recouped in the remaining lifespan (or time to retirement) is much larger than we had been led to believe.

Of course recent bear markets, where aggressive Central Bank policy led to rapid recoveries in asset prices, have made this recency bias even worse. It's now been an investing generation (1966-1980) since we've had a proper grinding bear market (if you are not Japanese). Although 2000-03 felt like one particularly if your job was connected to the tech sector.

When I began my career I worked with people who had begun theirs and then lived through the UK 1972-74 Bear Market (roughly down about 80% in real terms).

And of course on this board, Taylor Larrimore appears to be the last person who remembers the 1929-1949 period and what it did to stock market investors (such as his family).
Last edited by Valuethinker on Sun Jun 18, 2017 7:31 am, edited 1 time in total.

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by Valuethinker » Sun Jun 18, 2017 7:30 am

peterinjapan wrote:I am 49 years old (well, in three days) yet I am 90% equities (mostly domestic). I figure this is okay because my other "anchor" investments are

a) three properties in San Diego which are all doing well and generating rental income which nicely cover the mortgage payment.
b) a lot of social security coming
c) 401(k) of $300k
d) super conservative Japanese wife who loves to save cash at 0.00015% interest rate
e) wife also does weird random investments like Azerbaijani bonds yielding 12% and a new investment in a resort for Chinese tourists in Cambodia, which will be sold to other investors after it's developed partially.

Thus I feel pretty good about my too-many-stocks position, holding very few bonds.


Mrs Watanabe is, no kidding, a staple figure in global finance. It was the Yen Carry Trade, borrow in Yen, invest in bonds of high yielding countries like Iceland (then 15%) and New Zealand (then 8%). Post the 2008 Crash, this presumably all unwound. They now talk about a "Dollar carry Trade" because borrowing in USD is so cheap.

One time, in 1998 during the Asia Crash, the Yen moved up 14 per cent in one day against the dollar! Probably one of the largest single day moves in history in one of the top 5 currency trade pairs.

EM Bonds are I think a trap. But there are some countries that won't be a trap. If they pay high yields, there is significant political/ macroeconomic risk.

Anything that depends on Chinese money flowing out, I have worries about. See Toronto Vancouver Sydney Melbourne Auckland. All bubbles, all when they blow will be impressive in the scale of collateral damage.

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by SQRT » Sun Jun 18, 2017 7:39 am

delamer wrote:
JonnyDVM wrote:Agree with your opinion on SWR and I've brought it up many times to the point where I've stopped reading SWR threads. The super conservative SWR folk are going to wind up working longer/harder and leaving a huge ball of money behind. Opportunity cost to the max. To the inevitable "well what if I go broke?" response- my answer is if you're that scared buy an annuity. It'll pay you better than your super conservative SWR.

If you want to manage your retirement with a planned 2% SWR fine. But I think telling others to do the same is bad advice.



But doesn't this issue -- like some many others on the forum -- come down to the level of assets involved?. It is understandable why someone with a $500,000 nest egg might want to have a conservative withdrawal rate. For someone with $5,000,000, it is unnecessarily limiting.


Yes, agree. It's difficult to discuss SWR without knowing the context of portfolio size. Given the understandable reluctance of most people to disclose their portfolio size, the discussion becomes less useful. I doubt there are many people with 8 figures planning on a 1% WR unless they have thought a lot about their legacy. Really need to link the WR with legacy objectives.

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by blaugranamd » Sun Jun 18, 2017 10:57 am

triceratop wrote:Au contraire! When I talk to friends I am by far the most financially aggressive. But I don't take unnecessary risks. Consider:

1. I use intermediate-term treasuries both as my emergency fund and as a 5-10% bond allocation.

2. I am effectively 100% equities with extra-volatile allocations to SCV, EM, EMV.

3. I am in grad school for a degree which should increase my career options. But, this is a risk.

Many of my friends use short-term CDs and think stock investing is for daring folks who want to get rich. With CDs they're losing ~1% real. Studies have shown my millennial generation owns fewer stocks than the boomers. I'm okay with the risk of stocks; at least they have a positive expected real return.


Similar for myself. I think you may be confusing the Boglehead tendency to have a high savings rate and avoid overly luxurious spending and substantial lifestyle creep as conservative. Consider myself:
- 90/10 asset allocation for retirement assets, 30% international (very aggressive)
- 1/3 of my E-fund is in intermediate term municipal treasuries (aggressive by this board's view)
- 30/70 AA for my home down payment savings in 6 years (a touch aggressive)
- Gross savings rate of 35%
- No financial advisor (aggressive? risky?)
- We own a pretty cheap home valued at $188k (conservative?)
- Our cars are owned outright and are not terribly fancy (conservative?)
- The past year we spent: 1 week in Florida, 2 weeks in Hawaii, 1 week skiing in Colorado. (aggressive spending?)

Discussions on how much to save, SWR, etc may screw to conservative naturally because of the consequences of being wrong. Assuming 25x and 5% SWR and running out of money in your 70s is catastrophic. As others have said, there's probably a bit of an overall pessimism about the market lately that is pushing those figures up. Overall though, I think this forum has a heavy emphasis on risk-adjusted return that avoids looking for "home run" investments and a very heavy emphasis on opportunity cost, be that overspending on a home that costs you vacations, substantial savings opportunities, etc. and the latter often gets viewed as conservative.
-- Don't mistake more funds for more diversity: Total Int'l + Total Market = 7k to 10k stocks -- | -- Market return does NOT = average nor 50th percentile, rather 80-90th percentile long term ---

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by hamiltop » Sun Jun 18, 2017 11:10 am

As a young person in the Bay Area, I definitely am not conservative with my housing costs. I'm well in excess of the 30% of income rule (even on gross).

Frankly, I just don't see how one can get ahead out here without taking some chances. So far they've paid off. We wouldn't have been able to "afford" our current home if we hadn't done the same thing on a starter home 3 years ago and captured the appreciation of real estate out here.

Might everything come crashing down? Sure. That would suck. But it's a risk I'm willing to take.

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by Mudpuppy » Sun Jun 18, 2017 11:35 am

peterinjapan wrote:e) wife also does weird random investments like Azerbaijani bonds yielding 12% and a new investment in a resort for Chinese tourists in Cambodia, which will be sold to other investors after it's developed partially.

That last one sounds a bit like a pyramid scheme. Have you seen concrete numbers on it? Weird random investments can easily lead to being taken in by a con artist. The con is typically run with large, early returns on small sums of money to hook the mark in, then the con artist absconds with the larger investment.

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Re: Who takes financial chances and why is this forum so financially conservative?

Post by *3!4!/5! » Sun Jun 18, 2017 1:05 pm

Valuethinker wrote:Mandelbrot was a real eye opener for me, re volatility of financial markets, in particular stocks. ..., asset price returns do not appear to be Normally distributed (Gaussian). In fact they are fractal. ...

Huh? What does that even mean? There seems to be a category error here.

I would think that what may be (log)normally distributed in an idealized model, and skewed away from that in real data, is a probability distribution of returns.

Whereas what would be fractal is the time sequence of values.

In fact, a continuous-time random walk
https://en.wikipedia.org/wiki/Continuou ... andom_walk
is typically fractal, in particular in this one, the Wiener process
https://en.wikipedia.org/wiki/Continuou ... k#Examples
https://en.wikipedia.org/wiki/Wiener_process
"the jumps are continuous and normally distributed".

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