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Old 03-13-2018, 09:03 AM   #1
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Hi I'm Q's Laptop and I Don't Want to Retire Just Yet

Hello EarlyRetirement.org.

I'm 60 years old, married, have two children, one is a junior in college the other is a senior in high school.

I'm a business owner that has been manufacturing and marketing my invention for the past 30 years. I work (mostly) at home. I figure the sale of my company will be the final piece of my retirement wealth accumulation. But, I really like what I do and I don't want to retire just yet.

So what am I doing on EarlyRetirement.org?

Having recently migrated from Edward Jones to Fidelity I found this forum doing a search for Fidelity discussion forums. I started a bit of a stir when I jumped into a thread and asserted that some managed mutual funds can and do beat the index funds. Being an entrepreneur, it's not really in my blood to take a passive approach to money and investing. I just can't settle for the market average.

However, I'm not much of a trader, more of a buy-and-hold guy. Find a quality investment and stick with it. If there is a market correction I view it as a buying opportunity. I rebalanced my investments when I migrated to Fidelity and because of my age I reluctantly reduced my equity positions into safer investments.

So I was attracted to this place for the investment discussion but I figure I can learn a lot about retirement and what drives people to make the decision.
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Old 03-13-2018, 09:08 AM   #2
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Welcome.

I am not a passive investor either. But instead of picking MFs, over the years I have shifted to picking stocks myself. A bit extreme for this forum perhaps, but I think there are a lot of closet stock pickers here who are not as vocal as I am.

I do not beat the market every year. Sometimes I won, some years I lost. I did it for the fun too.
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Old 03-13-2018, 09:23 AM   #3
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Welcome.

I am not a passive investor either. But instead of picking MFs, over the years I have shifted to picking stocks myself. A bit extreme for this forum perhaps, but I think there are a lot of closet stock pickers here who are not as vocal as I am.

I do not beat the market every year. Sometimes I won, some years I lost. I did it for the fun too.
I have a TD Ameritrade account for my stock trades. I've done very well with Wendy's, sold half my stake when I was up 60% and am over 190% with the remainder. I turned a nice profit on JC Penney a couple of years ago. Held an oil stock for three years (GTE) and lost a little bit of money on it, 5% or so. Lost about 20% on RNN. Sold the GTE and RNN for the capital loss to offset some gains I had when I moved to Fidelity and bought TRBCX. I guess I'm getting a little less brave.
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Old 03-13-2018, 09:32 AM   #4
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Welcome aboard.

My main goal in investing is to have more at the end of the year than I did at the beginning, and I'm not too particular about how I achieve that goal. To that end, I have a mixture of mutual funds (both active and index) as well as individual stocks. Although I have been gradually whittling down my individual equities as I find myself less and less interested in evaluating and tracking them. In the past, I've also had ETF's, individual bonds, CDs denominated in different currencies and a variety of other things that I thought would achieve my overriding goal. For me, investing is just figuring out the best way to make money; it's not a religion with pagans, heretics, apostates and such.
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Old 03-13-2018, 09:36 AM   #5
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I stay quite diversified, and do not have more than 5% in any single stock. The only position that even approaches that 5% is Berkshire, and it is a conglomerate and more like an MF than a single stock.

But I do overweighting in different sectors at different times. That provides plenty of volatility and chances for gaining as well as losing mucho.
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Old 03-13-2018, 10:01 AM   #6
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....I rebalanced my investments when I migrated to Fidelity and because of my age I reluctantly reduced my equity positions into safer investments. ...
What did you move your AA to? And what "safer" investments?

I'm an avowed indexer. In my 20s I had my Dean Witter "guy" who recommended individual stocks to me... had winners and losers... indexing is easy and I'm content with earning the index return for my AA... though I do some minor tilts to make things interesting... sometimes I do better and sometimes worse.

Opportunistic rebalancing is about as adventureous as I get.

But it has worked out well... been retired 6 years... paid for living costs for 6 years, a new 2-car garage, a new car and a winter condo... all cash and I still have 125% of what I had when I retired.

For me individual stocks, done properly, are too much work... I wrote and read way to many 10-ks when I was working, no need to read them in retirement!
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Old 03-13-2018, 10:13 AM   #7
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What did you move your AA to? And what "safer" investments?
Overall I am at 60/40. My "safer" investments are Fidelity Total bond, Fidelity US Bond Index, PIMCO income fund, Fidelity Strategic Income, T. Rowe Price Global Multi-Sector Bond, a small amount in Fidelity High Income Bond and I threw a bone at Fidelity Emerging Market Bond.

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But it has worked out well... been retired 6 years... paid for living costs for 6 years, a new 2-car garage, a new car and a winter condo... all cash and I still have 125% of what I had when I retired.
Congratulations. You're doing great.

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For me individual stocks, done properly, are too much work... I wrote and read way to many 10-ks when I was working, no need to read them in retirement!
Yeah, I hear you. I've seen too many balance sheets and income statements over the years.
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Old 03-13-2018, 10:21 AM   #8
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Welcome aboard.

My main goal in investing is to have more at the end of the year than I did at the beginning, and I'm not too particular about how I achieve that goal.
That is a very succinct way of putting it and basically defines overall success.

Quote:
To that end, I have a mixture of mutual funds (both active and index) as well as individual stocks. Although I have been gradually whittling down my individual equities as I find myself less and less interested in evaluating and tracking them.
I'm moving away from owning individual stocks as well. The excitement is dwindling.

I do focus on the top ten holdings in mutual funds and try to avoid too much overlap. A lot of mutual funds are almost identical in the top five holdings and very similar in the top ten.

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In the past, I've also had ETF's, individual bonds, CDs denominated in different currencies and a variety of other things that I thought would achieve my overriding goal.
Individual bonds is something I'd like to learn more about. I have a pharma ETF, PJP, that is not impressing me too much but I keep thinking it will take off.

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For me, investing is just figuring out the best way to make money; it's not a religion with pagans, heretics, apostates and such.
Everybody's got their own style. What I find confounding is the zeal that indexers exhibit if you dare contradict their paradigm. I just don't get the gung-ho attitude to have an average return. Oh well.
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Old 03-13-2018, 10:21 AM   #9
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Welcome Q! You’ll find this place an excellent source of information to help lay the foundation for your retirement.
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Old 03-13-2018, 10:22 AM   #10
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I stay quite diversified, and do not have more than 5% in any single stock. The only position that even approaches that 5% is Berkshire, and it is a conglomerate and more like an MF than a single stock.

But I do overweighting in different sectors at different times. That provides plenty of volatility and chances for gaining as well as losing mucho.
I'm a big fan of Fidelity's sector funds. I don't have the stomach to get weighted into a sector of individual stocks though.
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Old 03-13-2018, 10:36 AM   #11
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....I just don't get the gung-ho attitude to have an average return. Oh well.
I would characterize it as acquiescence of average returns rather than gung ho... remembering that very few individual stock investors, amaturers or professionals, regularly achieve better than average returns in the long run. When even the greatest investor of our time advocates index funds that is a statement to be paid attention to.

My dad was more like you... entreprenurial and bought lots of individual stocks... had some winners but more losers than winners... when he retired he went into mutual funds and some were index funds.
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Old 03-13-2018, 10:45 AM   #12
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I would characterize it as acquiescence of average returns rather than gung ho
OK. I guess I'm surprised at the "enthusiastic vocalization of the index position" to put it nicely.

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... remembering that very few individual stock investors, amaturers or professionals, regularly achieve better than average returns in the long run. When even the greatest investor of our time advocates index funds that is a statement to be paid attention to.
This is a discussion for another time.

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My dad was more like you... entreprenurial and bought lots of individual stocks... had some winners but more losers than winners... when he retired he went into mutual funds and some were index funds.
Sounds like your dad went for safety in retirement.

Yes, I own some index funds as well. They have a purpose in my portfolio. I use them in my taxable fund because they have low turnover and don't pay much in dividends. I use bond index funds in my IRA's. I'll take the dividends there because they are tax deferred.
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Old 03-13-2018, 10:56 AM   #13
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.... Yes, I own some index funds as well. They have a purpose in my portfolio. I use them in my taxable fund because they have low turnover and don't pay much in dividends. I use bond index funds in my IRA's. I'll take the dividends there because they are tax deferred.
You're obviously familiar with tax efficient placement given that structure.

A couple things that you may or may not know... once you retire if you can keep your taxable income under $77,200 (in 2018)... with a $24,000 standard deduction that equates to $101,200 of total income... the tax rate for qualified dividends and LTCG is 0%. Also, I have found international equity mutual funds to be more than tax efficient.... while the small portion of dividends that are not qualified are ordinary income and subject to tax.... the foreign tax credit for foreign taxes paid actually exceeds the tax on the unqualified portion of the dividend, so not only are they tax free, the tax rate is actually negative after the foreign tax credit.... and the foreign taxes paid on international equities in tax-deferred or tax-free accounts do you no good so the best place for international equities is in taxable accounts.
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Old 03-13-2018, 10:58 AM   #14
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What I find confounding is the zeal that indexers exhibit if you dare contradict their paradigm. I just don't get the gung-ho attitude to have an average return. Oh well.
If folks want to hear about the current hot stock/hot fund/newest technical timing approach, etc, there are plenty of places to research that (and some folks here will spread that word, too).

If an approach produces better results than that achieved by the vast majority of active managers over time, is it really "average"? (15 year results, active equity managers trail equity indexes 93-94% of the time. , SPIVA, as of mid-year 2017). I'm okay with consistently being at approx 85th percentile, after I pay my meager ER to Vanguard.

Again, howdy. All denominations are welcome!
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Old 03-13-2018, 11:03 AM   #15
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"Average returns" is a misnomer. You are getting the market returns when purchasing the entire market.

"Average returns" is used by active fund managers and advisors to disparage index investors.

Total US stock index
Total International stock index
Total US Bond index

This approach is buying the market at the market cap weight. You won't get an average return, you get the full market return.

Each year, some active funds will beat the broader index funds before and after fees. They can't do it consistently and if they beat for a few years, they likely will lag for other years.

The most common techinque of an Edward Jones is to show you the fund that killed it last year. That has nothing to do if it will beat the index again this year. Most buy and then it underperforms. Then you repeat again.

Best to spend some time on Bogleheads.org if you want to understand index investing. You don't have to do it. Many do not. Tilts, REIT, sector funds, "dividend" strategies, 100% stocks, junk bonds, you name it, people do it because they think they want to add their seasoning to something that doesn't need to be seasoned.

Fees kill. Trading kills. Chasing performance kills. Chasing last years stocks and funds kill.

Passive market returns is a good place to be. What I love about the 3 fund portfolio is if you truely understand it, then you can start to understand other strategies.
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Old 03-13-2018, 11:13 AM   #16
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Welcome to the forum. Glad you checked in and looking forward to your participation.
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Old 03-13-2018, 11:28 AM   #17
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You're obviously familiar with tax efficient placement given that structure.

A couple things that you may or may not know... once you retire if you can keep your taxable income under $77,200 (in 2018)... with a $24,000 standard deduction that equates to $101,200 of total income... the tax rate for qualified dividends and LTCG is 0%.
I was aware of this and have done some "what if" scenarios with tax software.

Quote:
Also, I have found international equity mutual funds to be more than tax efficient.... while the small portion of dividends that are not qualified are ordinary income and subject to tax.... the foreign tax credit for foreign taxes paid actually exceeds the tax on the unqualified portion of the dividend, so not only are they tax free, the tax rate is actually negative after the foreign tax credit.... and the foreign taxes paid on international equities in tax-deferred or tax-free accounts do you no good so the best place for international equities is in taxable accounts.
Thanks for the tip. I'm going to look into this further. It may change some of my US/Int'l allocations.
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Old 03-13-2018, 11:30 AM   #18
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I guess I'm surprised at the "enthusiastic vocalization of the index position" to put it nicely.
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"Average returns" is a misnomer. You are getting the market returns when purchasing the entire market.

"Average returns" is used by active fund managers and advisors to disparage index investors.

Total US stock index
Total International stock index
Total US Bond index

This approach is buying the market at the market cap weight. You won't get an average return, you get the full market return.

Each year, some active funds will beat the broader index funds before and after fees. They can't do it consistently and if they beat for a few years, they likely will lag for other years.

The most common techinque of an Edward Jones is to show you the fund that killed it last year. That has nothing to do if it will beat the index again this year. Most buy and then it underperforms. Then you repeat again.

Best to spend some time on Bogleheads.org if you want to understand index investing. You don't have to do it. Many do not. Tilts, REIT, sector funds, "dividend" strategies, 100% stocks, junk bonds, you name it, people do it because they think they want to add their seasoning to something that doesn't need to be seasoned.

Fees kill. Trading kills. Chasing performance kills. Chasing last years stocks and funds kill.

Passive market returns is a good place to be. What I love about the 3 fund portfolio is if you truely understand it, then you can start to understand other strategies.
See what I mean?

BTW, I've read a "Boglehead's Guide to Investing". I'm well familiar with the strategy.
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Old 03-13-2018, 11:52 AM   #19
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It has been my experience on this forum that proselytizing about any investment strategy never works. Many have tried over the years, but we're generally old and set in our ways. So, I'm happy to tell you what I do and why I do it, but if you choose to do something else with your money, that's fine by me. If we were all in complete agreement about what to buy, all the stuff I like would be too expensive.
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Old 03-13-2018, 12:22 PM   #20
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It has been my experience on this forum that proselytizing about any investment strategy never works. Many have tried over the years, but we're generally old and set in our ways. So, I'm happy to tell you what I do and why I do it, but if you choose to do something else with your money, that's fine by me. If we were all in complete agreement about what to buy, all the stuff I like would be too expensive.
Pretty much the way I see it too. I am amazed at the lengths that index investors will go to try to persuade though.
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