2020: Lessons learned

[blrsmhr]

Cryptocurrency and related platforms are here to stay

[willthrill81]

Cryptocurrency and related platforms are here to stay

I don't think that many dispute that. Many governments, including that of the U.S., are looking for ways to use blockchains to create and manage new currencies. But I'm not at all convinced that Bitcoin, Ethereum, or any of the current cryptos will be around in a meaningful way over the years to come.

[TheTimeLord]

This is a very unboglehead thing for me to say, bit I kinda regret how much I've worked to prepare and plan for the future.

I kinda wish I had spent more time and more money enjoying life back before the end of the world, when money could buy things and experiences of value.

Now, I have this money and this time I could take, but the world no longer exists in which to enjoy it.

Don't worry. We're a long way off before the Artemis Accords start space wars on the moon.

This sounds like a reference to something funny and sci-fi dystopian that I should recognize, but I'm missing it.

The Artemis Accords are an international agreement between governments of participating nations in the Artemis program on the principles for cooperation in the civil exploration and use of the Moon, Mars, comets, and asteroids for peaceful purposes, and is grounded in the Outer Space Treaty of 1967.

The Accords were signed by the directors of the national space agencies of the United States, Australia, Canada, Japan, Luxembourg, Italy, the United Kingdom, and the United Arab Emirates on October 13, 2020. Ukraine became the ninth signatory of the accords on November 13, 2020.

[000]

Cryptocurrency and related platforms are here to stay

I don't think that many dispute that. Many governments, including that of the U.S., are looking for ways to use blockchains to create and manage new currencies. But I'm not at all convinced that Bitcoin, Ethereum, or any of the current cryptos will be around in a meaningful way over the years to come.

You think a fiat crypto will replace hard crypto? That seems like quite a stretch unless governments are able to effectively ban hard cryptos.

[BAM55]

Watching our portfolio go down about $450k in a little over a month. Staying the course - and actually buying on a (big) dip - and watching it go back to where it was. Then watching it go up +$500k from there. What a roller coaster. Net-net - stay the course!

[quadog]

I certainly learned the difference between Wall Street and Main Street.

I learned that the only thing you might want to market time is tax loss harvesting. I was only off by a few days.

I learned that some systems may be more robust than I thought possible. Time will tell if these systems are anti-fragile, ie, getting stronger as a result of shocks.

I learned I’m actually OK holding relatively small positions in fixed income and international.

I learned there is opportunity in chaos.

[Stef]

I learned that 100% stocks is the right AA for me, maybe even too conservative.

[stimulacra]

Main lesson for 2020: I need a larger emergency fund.

Not a lesson learned but one that was greatly reaffirmed this year: Stay the course.

I didn't make any panic moves in March or April so as a result 2020 has been a pretty good year retirement wise.

[kayli69]

Even the safest, most recession proof job is not safe in a pandemic

[TheTimeLord]

Watching our portfolio go down about $450k in a little over a month. Staying the course - and actually buying on a (big) dip - and watching it go back to where it was. Then watching it go up +$500k from there. What a roller coaster. Net-net - stay the course!

$450K is a big dip for a million dollar portfolio, not so much for a ten million dollar portfolio. We have no context on how scary your roller coaster ride was.

[Anon9001]

I learned that Bitcoin is still not digital Gold due to it crashing in March. Also that owning Gold did not improve a stock and bonds portfolio locally from 1996-2020. This is why I am planning to reduce the Gold allocation of my portfolio significantly (The reason I held it before in significant quantities is because I had mistaken the asset as a inflation/hyperinflation hedge).

[BAM55]

Watching our portfolio go down about $450k in a little over a month. Staying the course - and actually buying on a (big) dip - and watching it go back to where it was. Then watching it go up +$500k from there. What a roller coaster. Net-net - stay the course!

$450K is a big dip for a million dollar portfolio, not so much for a ten million dollar portfolio. We have no context on how scary your roller coaster ride was.

Good point! On a scale of 1 to 10, with 10 being very scary (i.e. a million dollar portfolio), I would rate it a 4. Got my attention, but didn't make me sick!

[chuckb84]

Financially, what did you learn from 2020?

Stay the course. Follow your IPS. It's great to have bonds to exchange into depressed stock prices.

[IMO]

Having prepared meals delivered to our house daily isn’t that much more expense than buying groceries and prepping the meals myself when you consider time spent prepping the meal.

How so? Are you giving up paid hours to prep your meals?

Or where are you buying your groceries? In no way shape or form is it cheaper in my world to have prepared meals delivered to to our house than buying and preparing groceries/meals ourselves. The argument of "considering the time spent" is pretty much a false argument in almost all cases IMO.

[ccf]

I learned that staying the course when the market is tanking is easier than sticking with it when the marking is rocketing up and everyone seems to be making money.

[CMLAW1]

I learned that I don’t need bonds and can stare in the face of a market crash and do nothin but buy

We still have bonds, but 2020 made us realize that perhaps our AA is a little too conservative. We've adjusted it to hold more stocks.

Same! It will pay off!! Happy New Year!!

[SocalLiving]

I reaffirmed once again that my IPS and 70/30 AA work for me. I had to rebalance, which was novel but not hard emotionally.

I put everything on auto-invest and focussed on getting my kids through distance learning and finding new ways to generate lost income from home. I did not once worry about what the markets were doing.

I was very thankful for everything the Bogleheads have taught me this year, but I had to stop visiting the board in March because a lot of posters were freaking out about the markets and it seemed unproductive. I came back in December to get information on an annuity we are stuck with. It is wonderful that the board is back to being a calm source of valuable information.

I learned that being prepared at all times for a big earthquake is very good for other emergencies as well. We have now added a few more items to our emergency stocks to cover long pandemic lockdowns.

I learned that I miss traveling a lot. We will be adding a third travel vacation to every year as soon as things return to normal.

[Northster]

The importance of sharing my good fortune with those less fortunate.

[firedup]

I learned that when the market tumbles, having debt makes me anxious--especially since I am near retirement.

So when the market rose again this year, I paid off my mortgage and moved some profits to cash to help cushion any future dips.

Now, I sleep better at night and am less focused on market swings.

[BionicBillWalsh]

Don't always listen to the advice given on this board...otherwise you may pull the trigger on selling a large amount of Tesla stock way too early due to single stock risk.

Are you applying this learning by making a large investment in a new company currently trading at a much lower price than its intrinsic value? If so I’d love to know which one

Actually...yes.

[CyclingDuo]

I learned that when the market tumbles, having debt makes me anxious--especially since I am near retirement.

So when the market rose again this year, I paid off my mortgage and moved some profits to cash to help cushion any future dips.

Now, I sleep better at night and am less focused on market swings.

That's the goal of the War Chest when it comes to cash/bonds for withdrawals so you can sleep well at night and ignore the equity markets...

[firedup]

I learned that when the market tumbles, having debt makes me anxious--especially since I am near retirement.

So when the market rose again this year, I paid off my mortgage and moved some profits to cash to help cushion any future dips.

Now, I sleep better at night and am less focused on market swings.

That's the goal of the War Chest when it comes to cash/bonds for withdrawals so you can sleep well at night and ignore the equity markets...

That's a great way to think about it. Thanks for sharing!

[CyclingDuo]

I learned that when the market tumbles, having debt makes me anxious--especially since I am near retirement.

So when the market rose again this year, I paid off my mortgage and moved some profits to cash to help cushion any future dips.

Now, I sleep better at night and am less focused on market swings.

That's the goal of the War Chest when it comes to cash/bonds for withdrawals so you can sleep well at night and ignore the equity markets...

That's a great way to think about it. Thanks for sharing!

I believe this particular rule - at least from the investment advisor that made that graphic for their clients - was to have at least 10 years in the War Chest (cash/bonds) to cover down markets that linger on for such a duration. Thankfully, since the 1950's we have not experienced too many lengthy periods outside of the 2000-2013 period, but that's not to say it couldn't happen again and the War Chest would help suffice. The example shows a 14 year, 3 month War Chest which would have helped through the 2000-2013 period.



CyclingDuo

[firedup]

I learned that when the market tumbles, having debt makes me anxious--especially since I am near retirement.

So when the market rose again this year, I paid off my mortgage and moved some profits to cash to help cushion any future dips.

Now, I sleep better at night and am less focused on market swings.

That's the goal of the War Chest when it comes to cash/bonds for withdrawals so you can sleep well at night and ignore the equity markets...

That's a great way to think about it. Thanks for sharing!

I believe this particular rule - at least from the investment advisor that made that graphic for their clients - was to have at least 10 years in the War Chest (cash/bonds) to cover down markets that linger on for such a duration. Thankfully, since the 1950's we have not experienced too many lengthy periods outside of the 2000-2013 period, but that's not to say it couldn't happen again and the War Chest would help suffice. The example shows a 14 year, 3 month War Chest which would have helped through the 2000-2013 period.



CyclingDuo

Yep, I have around 8 to 10 years right now (depending on fluctuations in our annual expenses) but I'm hoping I won't need it.

[CyclingDuo]

Yep, I have around 8 to 10 years right now (depending on fluctuations in our annual expenses) but I'm hoping I won't need it.

Sounds good!

Having gone through the dot-com bust, the financial crisis - and what that 13 year secular period without a War Chest was like (due to younger age and still being in accumulation mode at the time), I think both you and I will be happier having a nice War Chest if and when a string of years come along that have our equities down for a protracted period of time so we don't need to pull money out of them.

This goes with the strategy that Bill Bernstein suggests "If you've won the game, stop playing."

https://www.morningstar.com/podcasts/the-long-view/1

CyclingDuo

[firedup]

Yep, I have around 8 to 10 years right now (depending on fluctuations in our annual expenses) but I'm hoping I won't need it.

Sounds good!

Having gone through the dot-com bust, the financial crisis - and what that 13 year secular period without a War Chest was like (due to younger age and still being in accumulation mode at the time), I think both you and I will be happier having a nice War Chest if and when a string of years come along that have our equities down for a protracted period of time so we don't need to pull money out of them.

This goes with the strategy that Bill Bernstein suggests "If you've won the game, stop playing."

https://www.morningstar.com/podcasts/the-long-view/1

CyclingDuo

I completely agree. My portfolio got crushed during the financial crisis but I was working at the time so it really didn't bother me. I didn't need the money to live. I just kept investing every month and welcomed the pull back since I knew it would benefit my family long-term.

Now, near retirement it's a whole new ball game. While I do pull money out via dividend distributions and cap gains to cover our living expenses, I want to avoid selling large amounts of equities during protracted periods of decline.

I love Bernstein's quote. I would just add another thought to it. "If you're going to keep playing, play with house money." To me, my War Chest is chips off the table (not to mix metaphors). We are all still playing when we participate in the market. I want to play since long-term there is value in that. I'm just not going to gamble money I need to live a comfortable life.

[CyclingDuo]

Yep, I have around 8 to 10 years right now (depending on fluctuations in our annual expenses) but I'm hoping I won't need it.

Sounds good!

Having gone through the dot-com bust, the financial crisis - and what that 13 year secular period without a War Chest was like (due to younger age and still being in accumulation mode at the time), I think both you and I will be happier having a nice War Chest if and when a string of years come along that have our equities down for a protracted period of time so we don't need to pull money out of them.

This goes with the strategy that Bill Bernstein suggests "If you've won the game, stop playing."

https://www.morningstar.com/podcasts/the-long-view/1

CyclingDuo

I completely agree. My portfolio got crushed during the financial crisis but I was working at the time so it really didn't bother me. I didn't need the money to live. I just kept investing every month and welcomed the pull back since I knew it would benefit my family long-term.

Now, near retirement it's a whole new ball game. While I do pull money out via dividend distributions and cap gains to cover our living expenses, I want to avoid selling large amounts of equities during protracted periods of decline.

I love Bernstein's quote. I would just add another thought to it. "If you're going to keep playing, play with house money." To me, my War Chest is chips off the table (not to mix metaphors). We are all still playing when we participate in the market. I want to play since long-term there is value in that. I'm just not going to gamble money I need to live a comfortable life.

Absolutely, I agree. That's Bernstein's premise. The rest can continue to be invested for legacy, charity, heirs, lifestyle enhancements beyond one's usual needs, etc... .

[kaudrey]

We learned, or maybe just decided, that we shouldn't stay "somewhat happy" living in our townhouse in a small city outside a bigger city, and took the plunge (as so many others did), and bought a house 30 miles away in the suburbs. We moved in October, got our house by winning a bidding war, and sold the townhouse above list as well. Without COVID, we wouldn't have moved for several years. And, we weren't even sure we were going to stay in the area. Being home since March changed our perspective on a lot of things, and made us really think about what we wanted going forward.

We are so much happier, plan to stay here for the long term, and am counting down to the end of 2021, at which time I will be retiring (DH is already retired).

[ddurrett896]

Don't run low on toilet paper.

[Sandi_k]

- Having accessible savings matters.

- I am fortunate to have a secure job for now.

- Having an IPS kept me investing automatically all year. Having an IPS did NOT inspire me to rebalance while the knife was falling. I need to ponder how to do better next time.

- Having pondered on the "bucket" model, designing an AA that is in secure investments for the first 5 years of my proposed retirement means two things: 1) that I can ignore the gyrations of the market, and 2) it will cover SORR as well.

All in all, it wasn't a bad year: no one in my immediate family got Covid, although two close friends did. Happily, no deaths in the family/friend circle. In the extended circle, we're now at 4 deaths. It really does put things in perspective.

[luminous]

All in all, it wasn't a bad year: no one in my immediate family got Covid, although two close friends did. Happily, no deaths in the family/friend circle. In the extended circle, we're now at 4 deaths. It really does put things in perspective.

Absolutely.

[danbdzs]

I learned that 100% stocks is the right AA for me, maybe even too conservative.

I might be naively deceived by the shortness of the Feb/March plunge, but I feel the same way.
Are you thinking of doing something about it? - Obvious answer to me for more risk would be leverage? maybe alternative assets?

[Stef]

I learned that 100% stocks is the right AA for me, maybe even too conservative.

I might be naively deceived by the shortness of the Feb/March plunge, but I feel the same way.
Are you thinking of doing something about it? - Obvious answer to me for more risk would be leverage? maybe alternative assets?

Thinking about margin to increase stock exposure to ~120% or just use leveraged ETFs like SSO and UPRO to get the same effect, for example 90% VTI 10% UPRO.

[HMSVictory]

Stay the course was once again proven to work. I'm up 70% from the March 2020 lows with DCA into the down market.

Debt entails risk - always. I've been debt free for a few years now and it was very comforting this year. Also provides cash flow to invest more (see above). I was able to plow all my cash flow into my investments.

Like other posters I have invested through many storms but this was my first pandemic and all of our principals applied. The Captain of the ship isn't paid to navigate still calm waters they are paid to know how to navigate storms!

I want to concur 100% with the war chest analysis above my posts. Having the cash to avoid pulling money from a down market for 10+ years is very, very wise and gives a retiree a lot of flexibility. One nuance I would add is to take your expenses minus your SSI or pension income (if any) and that is your cash need per month. Then take that shortfall times 10 to come up with your war chest amount. NOW with that set aside you can invest the rest into equities which would give you a much more aggressive portfolio than many retirees.

[international001]

continue to buy in big on huge dips

I asked this in another thread w/o confirmation
It's known that waiting for huge dips to invest it's an average bad strategy. If you have a lump sump, invest it ASAP
But if you had the chance (by luck) to invest your lump sum during a dip (let's say every time the market goes down by X%; of course investing at the very bottom is cheating because you can only know in retrospect), would this improve your odds of the long term?

[CyclingDuo]

I want to concur 100% with the war chest analysis above my posts. Having the cash to avoid pulling money from a down market for 10+ years is very, very wise and gives a retiree a lot of flexibility. One nuance I would add is to take your expenses minus your SSI or pension income (if any) and that is your cash need per month. Then take that shortfall times 10 to come up with your war chest amount. NOW with that set aside you can invest the rest into equities which would give you a much more aggressive portfolio than many retirees.

^^^^^This!^^^^^

Agree with you HMSVictory!

Pension, SS, rental income, royalties, dividends (at least a reasonable percentage of dividends), perhaps an annuity or staggered SPIA's, possibly even part-time or consulting work for the amount of years one plans on doing it, could all be factored into determining the size of the War Chest so that it is not too big or too small.

Kitces writes about factoring SS into one's overall balance sheet...



https://www.kitces.com/blog/valuing-soc ... nce-sheet/
https://www.morningstar.com/articles/70 ... allocation

And of course, John Bogle wrote about that as well in his book The Little Book of Common Sense Investing.

Mike Piper (ObliviousInvestor) says to factor it in as you mention, but don't call it a "bond"...

https://obliviousinvestor.com/social-se ... ot-a-bond/

Paul Merriman doesn't want an investor to call it an asset, but as you mention - factor it into how much of one's required income to cover expenses that does not come from the pension, SS, etc... - (again, to help build the appropriate size War Chest and an appropriate asset allocation).

https://paulmerriman.com/social-security-asset/

However one thinks about it, SS and a Pension do help one assemble the appropriate War Chest to survive a lengthy period when the equity markets are down during the economic cycle.

CyclingDuo

[PhrugalPhan]

That I would miss working out so much in the community gym with my fitness companions.

Oh my, that is the one thing I miss from going in to the office. I have done lunchtime jogs since working at home but its not nearly the same. I just signed up at a local gym today and did my first workout. Hopefully this will become my new routine.

[Cooper62]

For me personally, I feel better with more than a six monthly emergency fund. When I get my bonus in March most of it is going to bump up the emergency fund. I'm in my early 50s and always figured I could find something in my field even if I had to take a pay cut. After this I'm not so sure there will be much of anything for me in the short-term and it may take more than six months to find something. I used to feel fine about having a moderate mortgage (10% of our gross pay) and one car payment on a car we bought four years old used. Now I want the debts at zero in case of job loss. I'll be aggressively paying off the car and house.