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Old 05-20-2016, 08:19 AM   #41
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The 4% withdrawal rate used to accounts for flat and down years. You shouldn't have to do anything.
FIFY - this used to be widely held belief, but is it really going forward? Although dependent on your individual circumstances, maybe 2.5 to 3% is more like it.
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Old 05-20-2016, 08:44 AM   #42
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I had the impression your lifestyle had a greater international component.

Not picking on you in particular, just looking at how a simple number such as portfolio yield can mislead. Our original ER plans were to live abroad, and the decision on how to split the portfolio between US and non-US assets was impossible to resolve (for me). As it turned out, other factors came into play so I never had to live with this. My DD is married to a Canadian, however, and his father has business and personal ties in both countries, and they sure are impacted by the very strong variations in exchange rate.
Don't feel picked on at all. In my case total international expenses might represent 15-20% of our expenses. So FX rates do matter to some extent, and accordinly I started investing in Canadian stock that pays divs in US$.
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Old 05-20-2016, 09:03 AM   #43
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Our original ER plans were to live abroad, and the decision on how to split the portfolio between US and non-US assets was impossible to resolve (for me). As it turned out, other factors came into play so I never had to live with this. My DD is married to a Canadian, however, and his father has business and personal ties in both countries, and they sure are impacted by the very strong variations in exchange rate.
We spend about 10 months a year overseas and I had thought briefly about factoring this in to our asset allocation. I decided against it because we don't have a permanent residence anywhere outside the U.S. nor are we expecting to.

For expats who mostly intend to live in a single country and don't really have any plans to return to the U.S. it probably makes sense to try to hedge your currency risk. For us, the currency we're spending always changes (this year it's Pesos, Euros, Pounds, Kiwis, Aus $, Rand, Pula, and the Namibian dollar). We also expect and plan to eventually "retire" from our travels to the U.S. at some point.
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Old 05-20-2016, 09:20 AM   #44
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FIFY - this used to be widely held belief, but is it really going forward? Although dependent on your individual circumstances, maybe 2.5 to 3% is more like it.
That is beside the point. Whatever you think your safe withdrawal is, the theory is that you just take out that much, inflation adjusted, until you die. You don't go shopping around for alternate strategies or market timing any time you get nervous.
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Old 05-20-2016, 09:23 AM   #45
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Very interesting. This is what I meant when referring to "thinking outside the box." Thanks for sharing Mulligan!


If you are interested in them you should read the ongoing preferred stock thread in stock section to become more familiar if interested. Many members this past year have jumped on board and many have owned them for years and years. Preferred stocks are like a parallel but separate universe trading along side the commons. Like range from the very safe yielders to the extreme speculative. The safe utility ones are somewhat illiquid so one must be cognizant of bid/ask spreads or you can get fleeced. And some are extremely illiquid. I just bought 360 shares of a water utility that has raised its common 47 consecutive years. A bit lower yield than what I usually buy at 5.51% but $7 under par and a true monopoly company that has paid its preferred quarterly dividend promptly since 1956 issue. BUT... The 1000 shares that traded this week were the first trades since July of last year. This one is a permanent edition for me.
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Old 05-20-2016, 10:09 AM   #46
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If you are interested in them you should read the ongoing preferred stock thread in stock section to become more familiar if interested.
Yes, definitely get knowledgeable. It's a class of securities that has tons of variability between securities and plenty of trap doors. You should know what straight, cumulative, convertible, participating, callable, put/call, variable, subordinated, junior subordinated, and trust preferred securities are and what each means for your investment. Callable securities, for example, can have widely different yields depending on the level of future interest rates.

You might also want to be familiar enough with reading financial statements to know how much debt sits in the capital structure ahead of you and how much cash flow cushion there is for dividend payments.

None of this is meant as a criticism of the class. It's just a complicated security that needs to be understood in a way that equity mutual funds generally do not.
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Old 05-20-2016, 10:12 AM   #47
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That is beside the point. Whatever you think your safe withdrawal is, the theory is that you just take out that much, inflation adjusted, until you die. You don't go shopping around for alternate strategies or market timing any time you get nervous.
Yes, but throwing out 4% as if its the right number can be misleading.
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Old 05-20-2016, 10:18 AM   #48
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Gross suggested PFF when he was on CNBC a few weeks back, maybe that's the preferred ETF for dummies. Its yield right now is 5.79%, but the ETF is down today.
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Anyone else a little frustrated with things right now?
Old 05-20-2016, 10:23 AM   #49
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Anyone else a little frustrated with things right now?

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Originally Posted by Gone4Good View Post
Yes, definitely get knowledgeable. It's a class of securities that has tons of variability between securities and plenty of trap doors. You should know what straight, cumulative, convertible, participating, callable, put/call, variable, subordinated, junior subordinated, and trust preferred securities are and what each means for your investment. Callable securities, for example, can have widely different yields depending on the level of future interest rates.

You might also want to be familiar enough with reading financial statements to know how much debt sits in the capital structure ahead of you and how much cash flow cushion there is for dividend payments.

None of this is meant as a criticism of the class. It's just a complicated security that needs to be understood in a way that equity mutual funds generally do not.


Very true... I actually enjoyed researching all that. There are some preferred stock mutual funds out there also, but most are relegated to owning huge slugs of financials since they comprise 80% of the preferred universe. I do not like them. I stick mostly to basic cumulative utility preferreds whose protections are considerably stronger. Adding the monopoly layer along with buying only strongly capitalized ones is another cushion for me. Subtract the banks that I have little interest in and all the "trash" being pawned off for yield chasers, there really are only about a dozen that I track, buy and sell and I have looked the landscape over. But mostly I stay away because like you mentioned...I don't understand (and unwilling to learn) or trust their financial structure.
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Old 05-20-2016, 10:34 AM   #50
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Speaking of the frustration with the market, I often wish the market to crash hard, just to get it over with.

This time, I will go all in, I swear. Still have 27% in cash.
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Old 05-20-2016, 10:35 AM   #51
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Gross suggested PFF when he was on CNBC a few weeks back, maybe that's the preferred ETF for dummies. Its yield right now is 5.79%, but the ETF is down today.


Yes, that generally is considered "the big one". But my personal opinion only is I dont like bank non cumulative's and they are stuffed with those. And the issue is largely just financial issues, but that largely is the market. I dont like those onerous yearly expense fees draining yield too. I can buy safer, higher yielding ones with better yields. My issues cover dividends with after tax profit income by 50-70 times in a regulated monopoly environment with higher yields because I can buy the tiny illiquid issues mutual funds cannot.
Many junk trash issues cover dividends by 1 or less... And those oil/gas drilling company preferreds? Well they covered them a few years ago, now the preferreds are worthless from bankruptcy.
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Old 05-20-2016, 10:37 AM   #52
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Speaking of the frustration with the market, I often wish the market to crash hard, just to get it over with.

This time, I will go all in, I swear. Still have 27% in cash.
Me too. But even in 2008-2009, it went down slowly and went up slowly. Only in 1987 did it go down sharply in one day.
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Old 05-20-2016, 10:47 AM   #53
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It took 18 months for the market to bottom in the Great Recession. I set a personal high water mark in mid-Oct 2007. Bottomed out in Mar 2009. Both points roughly aligned with the S&P. But when you zoom out, the whole thing looked like a V shape.

Patient, grasshoppper. Your restraint will be rewarded.

Better hold on to my cash, and take pot shots here and there. No need to empty it in one barrage.

By the way, there's no cataclysmic event that parallels the cause of the Great Recession. So any dip will be more moderate. Am I missing something?
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Old 05-20-2016, 10:49 AM   #54
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We spend about 10 months a year overseas and I had thought briefly about factoring this in to our asset allocation. I decided against it because we don't have a permanent residence anywhere outside the U.S. nor are we expecting to.

For expats who mostly intend to live in a single country and don't really have any plans to return to the U.S. it probably makes sense to try to hedge your currency risk. For us, the currency we're spending always changes (this year it's Pesos, Euros, Pounds, Kiwis, Aus $, Rand, Pula, and the Namibian dollar). We also expect and plan to eventually "retire" from our travels to the U.S. at some point.
It makes a difference if you are dealing with hard or soft currencies. If you are pension based you don't have much choice, but shifting portfolio assets into a soft currency can have very bad outcomes. No easy answer or simple strategy here.
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Old 05-20-2016, 11:10 AM   #55
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It took 18 months for the market to bottom in the Great Recession. I set a personal high water mark in mid-Oct 2007. Bottomed out in Mar 2009. Both points roughly aligned with the S&P. But when you zoom out, the whole thing looked like a V shape.

Patient, grasshoppper. Your restraint will be rewarded.

Better hold on to my cash, and take pot shots here and there. No need to empty it in one barrage.

By the way, there's no cataclysmic event that parallels the cause of the Great Recession. So any dip will be more moderate. Am I missing something?
You are right it's a V shape over the long term. But I have a lot more cash than you so don't worry, be happy. I traded my AMAT for XLK in the last few weeks. But I'm being conservative. I've always picked the out of favors one. My goal is to beat by small amount, certainly better than CDs.
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Old 05-20-2016, 12:47 PM   #56
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My DD is married to a Canadian, however, and his father has business and personal ties in both countries, and they sure are impacted by the very strong variations in exchange rate.
Yes the US stands out as the exception. Most other currencies have held their values to each other.
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The S&P can do that without trouble. There is no need for stock picking. Even DVY will do that.
Very impressive history. Worrisome trend though. Perhaps that is behind this thread subject?
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It makes a difference if you are dealing with hard or soft currencies. If you are pension based you don't have much choice, but shifting portfolio assets into a soft currency can have very bad outcomes. No easy answer or simple strategy here.
We find some spill over effect, as in, Mexico prices go up because the USD has gone up. OTOH things made in Mexico have generally stayed the same.
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Old 05-20-2016, 12:54 PM   #57
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You are right it's a V shape over the long term. But I have a lot more cash than you so don't worry, be happy...
I was talking to myself, reminding myself to be patient.

Heck, in fact I have been too patient, sitting on that cash for so long waiting for the right moment that it hurts my overall return. Had I thrown it all in the market back in 2009 or even 2010, I would be better off by now despite the recent pull back.
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Old 05-21-2016, 12:01 AM   #58
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My divs (biggest source of cash flow) have been growing at about 7% per year. Not frustrated at all?
About same thing here as well. A lot of great buying opportunities this past year and start of this year with a steady increase in portfolio value. (individual) Dividend growth stocks have been paying off nice and steady while the S&P has been up and down and up an down again.
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Old 05-21-2016, 12:12 AM   #59
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I was talking to myself, reminding myself to be patient.

Heck, in fact I have been too patient, sitting on that cash for so long waiting for the right moment that it hurts my overall return. Had I thrown it all in the market back in 2009 or even 2010, I would be better off by now despite the recent pull back.
Don't beat yourself too hard. Same with my investment. I have never been fully 100% in stocks since 2004. At best 60% and that's already piled in. I'm not sure I would throw in 100% even if the market drop 10%. Maybe there should be a chicken investment club.
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Old 05-21-2016, 12:23 AM   #60
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What if stocks are flat throughout this year and again next year?

In light of this have you perhaps decreased your withdrawal rate if you use a total return approach or supplemented dividend income with cash to cover expenses? Curious to know what others think and if anyone is thinking "outside the box."
We continually try to lower our annual run rate while maintaining or improving our standard of living - actions like making the house more water and energy efficient, getting rid of the landline, and paying less for groceries, so we don't need to withdraw as much from the portfolio. We've probably made hundreds of small cuts, but they really added up. We had a lot of unnecessary expenses in our budget, so for us this has been a very high return on our time.

I also have a number of little passive or simple side income streams that also add up on the income side. I don't have the temperament for much in stocks, and bond/ CD rates are what they are, so to improve our finances I have to increase hobby income or reduce expenses or both.
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