Has Investing to Live Become Harder?

[haha]

Harder? How could it be harder? Bond interest is at extreme lows, cash and CDs yield close to nothing, and stocks are priced to give unusually low returns with unusually high risk.

What's not to like? Just stay the course! Renew your vows to Lord Bogle!

Ha

 

[rjohnla]

Hi Haha, +2, said it all.

 

[Hamlet]

One thing to keep in mind is that inflation is ultralow, and nothing on the visible horizon appears likely to change that real soon, IMO.

All of the valuation metrics people tend to use were designed in a world with 4%+ inflation, so they all look worse than they actually are.

When inflation is running at 1.5%, those big cap stocks yielding 3-4% don't look like a bad deal to me.

Harder? How could it be harder? Bond interest is at extreme lows, cash and CDs yield close to nothing, and stocks are priced to give unusually low returns with unusually high risk.

What's not to like? Just stay the course! Renew your vows to Lord Bogle!

Ha

 

[foxfirev5]

Some times are easier, some tougher. Expected returns may be lower in the future, but all a person can do is make an educated choice and proceed.

 

[rjohnla]

Hi Foxfirev5, I just want easy now. Yes, know that is not realistic. But darn, I want to other things than watch money.

 

[unclemick]

Hmmm - born in the 40's and having gone through a few decades it doesn't get much better than now - although I grant it could get even better in the future.

BUT - I retain my option to whine as an American. It's right there in the Bill of Rights or something.

Right?

Target Retirement 2015

heh heh heh - keep a few good stocks, watch Mr Market and do absolutely nothing 99% of the time. Football in season. Now investment wise I'll watch the finish of March Madness as male hormone medicine. And go back to hurry up just stand there letting those VG computers rebalance away - hopefully not getting shafted too bad by the 'Flash Boys'.

 

[clifp]

It was never easier. We see the great opportunities of the past after they have become history and do not recall that at the time it was not so easy to tell the nuggets from the pyrite.

I don't claim to have perfect memory, but I do have really vivid memories of financial events (unlike say movies where I can seldom remember what will happen next). I can remember resisting the urging of my mom and other to buy real estate in Silicon Valley opps. (although keeping money stocks was just as good. ) In 1993, I sold stock options and could find nothing better to do than my off my good adjustable loan, this was clearly a mistake.

Since I retired in 99/2000, invested has become more like a job (one that I like) rather than a hobby. So I have much clearer memories of my decisions. But not only that, I've been posting my investment thoughts discussion boards like this one or TMF retire early board. So when I say I thought stocks were super cheap in late 2008, and 2009, I can point to post like this one a week before the bottom saying Berkshire is good and a safe investment. I threw in the standard disclaimer, but I knew it was a buy. That was easy investing, the only question is when you'd start making good money not if. I can do the same thing for my investment views in 2000 back in on TMF.

I went back and looked at some of my 2007 posts, my AA was 65/35% back then. I thought bonds were not very attractive and stocks were looking fairly valued, but I wasn't whining about not having any good opportunities.

Harder? How could it be harder? Bond interest is at extreme lows, cash and CDs yield close to nothing, and stocks are priced to give unusually low returns with unusually high risk.

What's not to like? Just stay the course! Renew your vows to Lord Bogle!

Ha

Ha nails it. By any objective measurement 2014 is a much more challenging investment environment than 2007. Interest rates are lower, governmental debt is higher, P/E are much higher, and we've just come off a crazy good year. Now there may not be anything, the average investor can or should do. But I don't see the benefit of pretending that all investment periods are the same.

 

[LOL!]

Oh, I thought when the OP asked if investing has become harder, I was only thinking of the mechanics of investing. It seems some folks are more interested in investing to make lots of money easily. And when they don't then they call investing hard. Where did they ever come up with that idea?

 

[Hamlet]

FYI-

Shiller PE10 was actually a little higher in 2007 than it is now.

Shiller PE Ratio

Ha nails it. By any objective measurement 2014 is a much more challenging investment environment than 2007. Interest rates are lower, governmental debt is higher, P/E are much higher, and we've just come off a crazy good year. Now there may not be anything, the average investor can or should do. But I don't see the benefit of pretending that all investment periods are the same.

 

[clifp]

Oh, I thought when the OP asked if investing has become harder, I was only thinking of the mechanics of investing. It seems some folks are more interested in investing to make lots of money easily. And when they don't then they call investing hard. Where did they ever come up with that idea?

Well to me, easy or hard comes down to a simple question.

Can I construct a diversified portfolio that I have high degree of confidence will allow me to withdraw a 4% SWR a year? Back in 99/2000, with 4% TIPs, 5% muni bonds, and a super bull market getting to 4% seemed like a no brainer. In 2009, with lots of blue chip stocks with dividend yields in the 4% and 5%, I was pretty easy to get 4%.

Generally speaking for most of the last 20 years. You could look at the average expected return of various asset classes and get to 4% easily.
60% stocks with 6% real return =3.6%
40% bond with 3% real return = 1.2%
Total= 4.8% with nice margin of safety.

You can't do that now. The only way I can get to 4% now is by reduced my fixed income portfolio to very low percentage, and hoping for the best with stocks.

So the only reason I believe in 4% SWR is FIRECalc tells me historically it has worked 95% of the time.

 

[MichaelB]

We want higher interest rates and lower asset prices, so we can invest more in stocks and bonds? We had that a couple of years ago. Since then interest rates went down and equity prices went up. Isn't that a good thing? It gave us all a chance to make money.

All gain and no pain would be wonderful to have. Dealing with low and high prices is not easy for any of us but it's an important part of investing.

 

[rjohnla]

Oh, I thought when the OP asked if investing has become harder, I was only thinking of the mechanics of investing. It seems some folks are more interested in investing to make lots of money easily. And when they don't then they call investing hard. Where did they ever come up with that idea?

Hi LOL, yes, this what I meant. Hence, increased risk for most people.

Thanks

add: Greed (emotional), based investing, wow, good luck, if the person makes money was just very lucky.

 

[walkinwood]

Oh, I thought when the OP asked if investing has become harder, I was only thinking of the mechanics of investing....

+1

I think you can work hard at investing at any time - not just today - and maybe, maybe get rewarded for your work. But, the statistical studies indicate that the odds are against you.

 

[rjohnla]

walkinwoods, yes mechanics, but believe that has become harder with all the financial options now available to average, so savvy investor. Agree can work hard any time on anything (e.g., painting a room)and get bad results.