Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 08-25-2015, 04:28 PM   #121
Thinks s/he gets paid by the post
 
Join Date: Dec 2014
Posts: 1,666
Quote:
Originally Posted by haha View Post
You misunderstood my meaning, or I yours.

This whole thing is tricky. One wants to avoid frames that stampede him, but at the same time, as I said, once the security price is below basis, it is a loss whether taken or not. However, often people may say "I lost 50,000 today", not meaning that if they sold they would have an actual loss, but only that the value of this portfolio is $50,000 less than at yesterday's close.
I'm likely the one who misunderstood. There are many people who use "you don't loose money until you sell" as a "stay the course." And maybe I don't understand what anyone is saying. Maybe better I just ask, what do people mean when they say "you don't loose money until you sell"? If I understand HA, you mean you don't realize a loss until you sell, correct?
__________________

__________________
bingybear is online now   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 08-25-2015, 09:32 PM   #122
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,452
On Friday 8/21:

Quote:
Originally Posted by NW-Bound View Post
The consolation is my stock AA dropped only 2.07%, compared to S&P at 3.19%. So, how do I complain?

PS. Total portfolio down 1.33%, which compares favorably with Wellington for the same 60% stock AA. Wellington drops 1.91%. Wellington usually beats me when the market goes down, meaning going down less, but not today.
On Monday 8/24:
Quote:
Originally Posted by NW-Bound View Post
Today is a much worse day for me, compared to the drop on Friday.

S&P is down -3.94%. My stocks are down -3.22%, and my equity MFs down -3.11%.

Total portfolio down -2.05%, vs. Wellington -2.50%.
Today Tuesday 8/25:

S&P down -1.2%. My stocks down -1.05%. My equity MFs down -0.30%.

Total portfolio down -0.42% vs. Wellington -1.16%.

How did I beat the index and Wellington? My "lucky" streak may end any day now.
__________________

__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is online now   Reply With Quote
Old 08-25-2015, 09:43 PM   #123
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2004
Posts: 11,617
Quote:
Originally Posted by bingybear View Post
Maybe better I just ask, what do people mean when they say "you don't loose money until you sell"?
I can't speak for everyone, but here's what I would mean:
-- The shares of stock/MFs in my portfolio have values that are constantly going up and down, according to the winds of the marketplace. I paid something for them, but I haven't gained or lost any actual money until I sell them (because I haven't converted the shares into dollars).

The market value of securities I own just doesn't mean much until I sell them. Now, the closer that likely sale is, the more likely that the present value may indicate the price I'll get when I sell, so I'll start caring more.

NB: I know that this is all mindgames and that "mark to market" is the standard.
__________________
"Freedom begins when you tell Mrs. Grundy to go fly a kite." - R. Heinlein
samclem is offline   Reply With Quote
Old 08-26-2015, 05:45 AM   #124
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,451
Quote:
Originally Posted by bingybear View Post
I'm likely the one who misunderstood. There are many people who use "you don't loose money until you sell" as a "stay the course." And maybe I don't understand what anyone is saying. Maybe better I just ask, what do people mean when they say "you don't loose money until you sell"? If I understand HA, you mean you don't realize a loss until you sell, correct?
Shares in company,ETF,or mutual fund, represent a fractional ownership of companies. Regardless of the price of the stock/etf you still have the ownership percentage regardless of the prices. If you don't actual sell you aren't any poorer (or richer if it goes) up.

I think to a large extent you should view your portfolio the same way as your house. Unless you intend to sell the price is mostly irrelevant.

In the days before zillow and such, it was hard to get any type of estimate of the value of your home,and people didn't much attention unless they were selling. Imagine that in Jan. the same model house as your sold for $250,000 in your neighborhood, than last week two houses sold for $225,000

Did you lose $25,000 and does it matter?
__________________
clifp is offline   Reply With Quote
Old 08-26-2015, 06:00 AM   #125
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,537
To me a loss is compared to what I paid for something, not compared to some recent peak valuation.
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is online now   Reply With Quote
Old 08-26-2015, 08:43 AM   #126
Recycles dryer sheets
 
Join Date: Jan 2012
Posts: 244
The recent market gyrations have been nerve racking for most including myself. I haven't sold anything, but actually bought AAPl at 108.00 on monday.

In an effort to compare my investment results with that of the market i compared the returns for the period 6/30/2015 (last brokerage statement) to last night's balance. I noticed that from 06/30/2015 THRU 08/25/2015 S&P-500 dropped 9.50% and my all stock portfolio with 6% cash reserves dropped 7.78%. Perhaps dividend income had something to do with my portfolio doing a little better than S&P-500! That made me feel reassured that my asset allocation and investment strategy is working and I will stay the course instead of trying to time the market.
Thanks.
__________________
Rickt is offline   Reply With Quote
Old 08-26-2015, 10:21 AM   #127
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,452
Quote:
Originally Posted by audreyh1 View Post
To me a loss is compared to what I paid for something, not compared to some recent peak valuation.
True. Despite the recent haircut, my Quicken screen shows I still have several times that in unrealized gain. And I only started to track returns in Quicken for the last 5 years.

But, but, but when that gain is depleting, that brings to my mind the possibility that the SWR that I thought was safe may not have as much margin as thought. We need to be reminded every so often that the range of outcome is huge for a fixed WR as shown by FIRECalc. The more the market goes down, the more it looks like our future may, just may, resemble the FIRECalc line that looks like the trajectory of a sea-skimming Exocet than that of a shuttle take-off.

No, we are not there yet. Not with a measly 10% correction. But I like to know what's going on, and "See no evil, hear no evil, talk no evil" is not my style.
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is online now   Reply With Quote
Old 08-27-2015, 11:07 AM   #128
Thinks s/he gets paid by the post
JoeWras's Avatar
 
Join Date: Sep 2012
Posts: 2,531
After yesterday, I was kind of tempted to start a new thread named: "I just made 50k today -- How should I feel?" or something like that.

But, I didn't want to be a wise guy.
__________________
JoeWras is online now   Reply With Quote
Old 08-27-2015, 11:19 AM   #129
Administrator
Gumby's Avatar
 
Join Date: Apr 2006
Posts: 10,163
You should feel generous. I'll send you my address.
__________________
Living an analog life in the Digital Age.
Gumby is offline   Reply With Quote
Old 08-27-2015, 11:51 AM   #130
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,452
I do not know if it is just me, but I have noticed long ago right after I started to track my stash daily that the worst down days are of higher magnitude than the best up days. And that is the same with the indices. The ratio is about 1.5x to 2x. Longer term, the market tends to go up slowly, then crashes hard. The chart looks like a saw-tooth wave (EEs know what I am talking about here), but with asymmetrical slopes up and down.

That corroborates what we have also read elsewhere, that the pain of losing feels stronger than the pleasure of winning.

In succinct form, Fear > Greed in most people.

To win in the market, perhaps all one needs to do is to have "Greed = Fear", and learn to be greedy and fearful in the contrarian manner like Buffett said.
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is online now   Reply With Quote
Old 08-27-2015, 02:27 PM   #131
Thinks s/he gets paid by the post
JoeWras's Avatar
 
Join Date: Sep 2012
Posts: 2,531
Absolutely a saw tooth curve. Quick discharge on the capacitor, and slow charge back.
__________________
JoeWras is online now   Reply With Quote
Old 08-27-2015, 02:50 PM   #132
Thinks s/he gets paid by the post
redduck's Avatar
 
Join Date: Mar 2005
Location: yonder
Posts: 2,075
Quote:
Originally Posted by JoeWras View Post
Absolutely a saw tooth curve. Quick discharge on the capacitor, and slow charge back.
Darn, that's just what I was going to say.
__________________
Carpe cōleī
redduck is online now   Reply With Quote
Old 08-27-2015, 03:54 PM   #133
Thinks s/he gets paid by the post
 
Join Date: Sep 2012
Location: Seattle
Posts: 2,906
So what is the time constant here then? tau = RC but what value is R?
__________________
Fermion is online now   Reply With Quote
Old 08-27-2015, 04:18 PM   #134
Thinks s/he gets paid by the post
 
Join Date: Dec 2014
Posts: 1,666
Quote:
Originally Posted by Fermion View Post
So what is the time constant here then? tau = RC but what value is R?
R_up = 10E6 * R_down for same C

But be careful of the sparks on the way down!

Sorry... I know nothing of EE
__________________
bingybear is online now   Reply With Quote
Old 08-27-2015, 04:54 PM   #135
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,452
Very good. I was certain that many posters could relate to this sawtooth waveform. And in case you want to refresh some materials in that college class in the distant past - I don't know why you ERs would, but just in case - here's a youtube video on the analysis of this simple waveform.



The stock chart looks superficially like that. Observe that the ramp up is much slower than the quick skid down: the S&P just lost 18 months of gain in a matter of a week. In the past it has lost many years of gain in a matter of a few months. That's where the similarity with the sawtooth wave lies. Energy builds up slowly, then gets discharged very fast. And yes, same as with a capacitor discharge, there are sparks, accompanied by shocks and loud verbal curses. A difference with the sawtooth wave is that near the stock price crest, if one pays attention, he will discern many "Wheee" signals. It may be a distinct "Wheee" post, or it may be more subtle in the form of many posts in the "New Milestone" thread.

But the stock chart time scale is not constant. Is the market god tricky, or the investor sentiment very unstable, and border on the schizophrenic? The stock chart does not repeat, it only rhymes with itself.

So, what practical use comes out of this analogy? In real life, things cannot be so simple, else we would all be rich (Why not, some ask, but that's another subject and let me just say that some will have to work or society would fall apart). The stock price chart cannot have a definitive period, nor amplitude.

How do we use this analogy to the idealistic simpleton sawtooth waveform then, you ask? No, it does not lend itself to a direct and simple application. But observing that the ramp up tends to be slow will let us be patient in getting back in to the market after a crash. It is not going to run away from us and set a new high as quickly as it crashes.

Patient, patient... I am keeping my powder dry and continue to watch for a while. It takes time for that voltage to build up. I don't think I will be missing the boat.
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is online now   Reply With Quote
Old 08-27-2015, 05:02 PM   #136
Thinks s/he gets paid by the post
 
Join Date: Dec 2009
Location: Alberta/Ontario/ Arizona
Posts: 3,160
I gain or lose large amounts on a regular basis. I like to say " I made $xxx,xxx today but I 've made this same money many times before". It's really only new highs that get me thinking. New lows would also be an issue but highly unlikely.
__________________
Danmar is offline   Reply With Quote
Old 08-27-2015, 08:14 PM   #137
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,537
For recent market drops perspective, and related to sawtooth waveforms (sort of), this chart from Doug Short of Advisor Perspectives is handy to look at:



from S&P 500 Snapshot: The Rebound Continues - dshort - Advisor Perspectives

As you can see the last correction was in 2011, although we've had several >5% sharp selloffs since.
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is online now   Reply With Quote
Old 08-27-2015, 08:40 PM   #138
Recycles dryer sheets
 
Join Date: Jan 2014
Posts: 246
Quote:
Originally Posted by bingybear View Post
I'm likely the one who misunderstood. There are many people who use "you don't loose money until you sell" as a "stay the course." And maybe I don't understand what anyone is saying. Maybe better I just ask, what do people mean when they say "you don't loose money until you sell"? If I understand HA, you mean you don't realize a loss until you sell, correct?
You don't realize a gain, either. A sale transaction is where value is determined, by the buyer. They're willing to pay a particular price for your 'goods', and the chunk of change you as the seller end up with is the direct measurement of that motivation. Until then, all you have to go on are others' equivalent transactions, if you were to decide then and there to try to execute your own. But if you don't, you defer the determination of value to another day, and another market's proclivities.

It's probably a more-visible dynamic in real estate. I see this a lot: folks who have an inflated idea of what their home is worth, and no one is taking it at the solicited price. No sale, no determination of real value. And, with most homes, it's both the buyer and the mortgage company who determine what will be paid, based on their respective interests in securing 'value'.
__________________
ggbutcher is offline   Reply With Quote
Old 08-27-2015, 08:46 PM   #139
Thinks s/he gets paid by the post
 
Join Date: Dec 2014
Posts: 1,666
Quote:
Originally Posted by ggbutcher View Post
You don't realize a gain, either. A sale transaction is where value is determined, by the buyer. They're willing to pay a particular price for your 'goods', and the chunk of change you as the seller end up with is the direct measurement of that motivation. Until then, all you have to go on are others' equivalent transactions, if you were to decide then and there to try to execute your own. But if you don't, you defer the determination of value to another day, and another market's proclivities.

It's probably a more-visible dynamic in real estate. I see this a lot: folks who have an inflated idea of what their home is worth, and no one is taking it at the solicited price. No sale, no determination of real value. And, with most homes, it's both the buyer and the mortgage company who determine what will be paid, based on their respective interests in securing 'value'.
So if you use firecalc or other retirement income planner.... how do you determine what values to use?
__________________
bingybear is online now   Reply With Quote
Old 08-27-2015, 09:09 PM   #140
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,452
Quote:
Originally Posted by audreyh1 View Post
For recent market drops perspective, and related to sawtooth waveforms (sort of), this chart from Doug Short of Advisor Perspectives is handy to look at:



from S&P 500 Snapshot: The Rebound Continues - dshort - Advisor Perspectives

As you can see the last correction was in 2011, although we've had several >5% sharp selloffs since.
There are many little sawtooth in that chart, and of less than 10% in magnitude. But if one zooms out, she will see the bigger sawtooths, the less frequent ones that set you back 40 to 60%, like the ones in 2003 and 2008.

The bitty corrections are not scary, and if you are scared of them, well, I do not know what to say. It's the big tsunami ones that can ruin your ER that are fearsome. Heck, not just ER that gets hurt big time, but simple R becomes tough.
__________________

__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is online now   Reply With Quote
Reply

Tags
loss, mark-to-market, psychology


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Does Really Tough Exercise Make You Feel Younger? TromboneAl Health and Early Retirement 75 08-17-2015 06:42 PM
Hello, new here and feel lost.. rebar Hi, I am... 5 03-29-2015 08:55 AM
What does downshifting really look like? Focus FIRE and Money 14 11-30-2013 11:19 AM
I "feel" like I'm doing the right thing utah1016 Hi, I am... 12 05-13-2013 06:03 PM
Erd and really angry/feel like the wind knocked out of my sails. newguy88 Other topics 10 08-06-2007 08:23 PM

 

 
All times are GMT -6. The time now is 10:36 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.