Has Investing to Live Become Harder?

[rjohnla]

Sometime around 2012, several of us (ages 50s to 70s) came to conclusion that this was the most challenging investment environment of our lifes. The combination of record low interest rates, a fairly value stock market, and the threat of having to reverse the huge amount of money injected in the system by central banks made it very difficult.

More than year later, not much has changed stocks have gone from fairly valued to over valued, while the 1% increase in interest rates have made bonds go from crazily overvalued to merely overvalued. The Fed has tapered but is still injecting money into the system.

Truth be told there has never been a low risk, high reward investment ever. On the other hand I do remember most times in my life that something (growth stocks, value stocks, international stocks, junk bond, TIPS, real estate etc.) looked attractive.

Hi Clifp, like your post a lot. Thanks.

 

[LOL!]

Sometime around 2012, several of us (ages 50s to 70s) came to conclusion that this was the most challenging investment environment of our lifes. The combination of record low interest rates, a fairly value stock market, and the threat of having to reverse the huge amount of money injected in the system by central banks made it very difficult.

I think history though tells a different story. Let's just say that in 2012 the US total stock market index (fund) was up more than 16% and in 2012 it was up more than 33%. Great returns without any difficulty at all. I would not be surprised if it was one of the top ten 2-year-returns of all time.

But I think one has to get past one's own biases and wishful thinking and become completely unemotional about investing in order to get rid of any perceived difficulty.

 

[rjohnla]

Just to share, AAII is fully bullish (bear single) the public is all in now & insiders are dumping stock options. Little guy will get hit again I fear. This game I think is over for now. Could supply reams of stats, a lot from USG, but overall this is going to be a tough year esp. after elections are over. Until then keep pumping Fed, just delays inevitable and makes correction worse, history shows that. But their pols, they have status & enough $.

 

[Zathras]

Just to share, AAII is fully bullish (bear single) the public is all in now & insiders are dumping stock options. Little guy will get hit again I fear. This game I think is over for now. Could supply reams of stats, a lot from USG, but overall this is going to be a tough year esp. after elections are over. Until then keep pumping Fed, just delays inevitable and makes correction worse, history shows that. But their pols, they have status & enough $.

It is always possible you are right.
However, I heard very similar ideas from various posters last year, 2 years ago, 3 years ago, and 4 years ago.
One was dead certain that we would see S&P at 750 within months (as I recall).

This is why good diversification is so important. No one can know for certain what will or won't happen.

 

[CaliforniaMan]

Has Investing to Live Become Harder? YES!!!

This very month is the hardest month in the entire history of the human race to think about investing to live. How do I know this to be the absolute truth? Because this is the first month of my retirement, now it is more than theoretical, it is how well I eat each month. So yes, investing to live suddenly got much harder.

 

[David1961]

So yes, investing to live suddenly got much harder.

It does get easier.

 

[rjohnla]

I always said if necessary I'll work at Disney World as Big Bird if I have to. Hope you're right, but I've been doing this since 1987 and it seems to just get more complicated and risky. I don't like losing capital, so I watch it carefully.

 

[daylatedollarshort]

If your savings / other income streams are high enough compared to your spending you can live off TIPS, CD ladders, I bonds, stable value funds and still save money in retirement.

Bill Bernstein has referred to this as won the game, stop playing:

The worst retirement investing mistake - Sep. 4, 2012

"A lot of people had won the game before the crisis happened: They had pretty much saved enough for retirement, and they were continuing to take risk by investing in equities.

Afterward, many of them sold either at or near the bottom and never bought back into it. And those people have irretrievably damaged themselves.

I began to understand this point 10 or 15 years ago, but now I'm convinced: When you've won the game, why keep playing it?

How risky stocks are to a given investor depends upon which part of the life cycle he or she is in. For a younger investor, stocks aren't as risky as they seem. For the middle-aged, they're pretty risky. And for a retired person, they can be nuclear-level toxic."

 

[rjohnla]

Hi daylatedollarshort, well I'm done then Thanks.

& agree

 

[audreyh1]

I am not sure I understand what OP is asking. Has it become harder to invest successully? Depends on your point of view, I suppose. If you are looking for livable returns over the long haul, what is wrong with a diversified portfolio that contains some flavors of US equities, EAFE equities, emerging equities, USD and non-USD fixed income and perhaps a dollop of commodities or merger arbitrage funds? It isn't complicated unless you really, really want it to be.

Well I guess it was easier in the 80s and 90s when we were in a bull market cycle plus inflation and interest rates were dropping.....

The mechanics are much easier now IMO. And more low-cost investment vehicles to chose from.

But nothing beats dumb luck (a bull market cycle)!

 

[audreyh1]

It is always possible you are right.
However, I heard very similar ideas from various posters last year, 2 years ago, 3 years ago, and 4 years ago.
One was dead certain that we would see S&P at 750 within months (as I recall).

This is why good diversification is so important. No one can know for certain what will or won't happen.

+1!

Beware conventional wisdom - a.k.a. the market seeks to confound the most participants.

 

[nun]

Just to share, AAII is fully bullish (bear single) the public is all in now & insiders are dumping stock options. Little guy will get hit again I fear. This game I think is over for now. Could supply reams of stats, a lot from USG, but overall this is going to be a tough year esp. after elections are over. Until then keep pumping Fed, just delays inevitable and makes correction worse, history shows that. But their pols, they have status & enough $.

Huh? I don't understand any of this and if I did I wouldn't act on it. I get the feeling that the OP is making things far harder than they need to be. I'm relieved no stats were supplied.......

 

[clifp]

I think history though tells a different story. Let's just say that in 2012 the US total stock market index (fund) was up more than 16% and in 2012 it was up more than 33%. Great returns without any difficulty at all. I would not be surprised if it was one of the top ten 2-year-returns of all time.

But I think one has to get past one's own biases and wishful thinking and become completely unemotional about investing in order to get rid of any perceived difficulty.

Well obviously with the benefit of hindsight 2012, and 2013 were fantastic years.

I guess the point is that most of the time I've been investing their has always been an investment which looked good on an absolute basis. Since 2012, stocks have only been cheap on relative basis to bonds.

Back in 1996,97 I was true believer that internet was going to change everything and so tech stock looked cheap.
By 2000,2001 TIPs bonds had real interest rate near 4% and they looked inexpensive (pretty easy to fund a 4% SWR with 4% TIPs bonds) on absolute basis, much less on relative basis to crazy expensive stocks when even GE had P/E of 40..
In 2006 stocks looked cheap, and you had Pen Fed 6% CD
By the end 2008, and 2009 lots of assets looked cheap on absolute basis, stocks, junk bonds, real estate in most markets. I had no doubt they would all be much higher in 5 to 10 years.
In 2011, there was the PenFed 5% 10 years CD.

Starting the middle of the 2012, nothing has looked cheap on an absolute basis.

 

[MichaelB]

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.

 

[ziggy29]

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.

Yep. We may think back to the days of the 30-year Treasury bond yielding 12% (or whatever it was) and think it could never be easier.

But we forget that in the climate of the time, there was so much widespread fear of long-term runaway inflation that a lot of people didn't jump on that deal, fearing inflation (and interest rates) would only keep going higher...

With the benefit of hindsight, of course, that looked like the deal of the century, as did the depressed stock market valuations at the same time (right before the massive bull market that began in 1982). Similarly, the I-bonds I purchased in 2000 with a fixed yield of 3.4% turned out to be a pretty darned good buy, too, but at the time few people saw the "war on savers" coming up a few years later, or the rotten stock market of the next nine years -- or else everyone would have been plowing money into them, and the yields would have crashed as the Treasury wouldn't need to pay that much to attract investment.

And then there was the market in early 2009. Many people were afraid and convinced that a global depression and utter and complete implosion of the economic system was coming. Those who stuck their necks out at the bottom saw their investments double over the space of about 3.5 years.

 

[rjohnla]

Just fyi, was reading CNN Money on-line this am. Here's some headlines (More Jobs): Growth not strong enough


Private sector jobs back to 2008 peak



Economy is sluggish

What market history will show is that most people, not people on this site, although it can get rancorous here . But hey were just sharing ideas, experiences, etc., to help each other. I can't in good conscious say that we're not headed for another downturn. No jobs to be had, falling demand, not anywhere close to a typical recovery. QE has pumped a bubble market and it will deflate. I do not believe now that diversification will help. Every upturn/downturn is always slightly different. The difference now? Why not like 1983-2000? This recovery is really pathetic except for people making money in the bubble market, for now. Take care.

 

[rjohnla]

Morning Nun, just to clarify: I was listing some contrary indicators: 1) when the American Assoc. of Individual Investors AAII is extremely bullish, it has never ended well; 2) Insiders sell for many reasons. One reason they do not sell is if they think the stock is going up and 3) the USG and others have a history of making things worse by delaying the inevitable correction cycle. Hope that makes easier to understand. Let me know.

 

[walkinwood]

@Wave3 - you're making your investing life a lot harder than it needs to be. Read Berstein, Malkiel and others about the futility of consistently predicting market returns correctly. Stay away from financial porn.

As others have said, we are lucky to be living in a time that investments are convenient and inexpensive. Pick an AA and stick to it using low cost, low turnover active or passive mutual funds and rebalance regularly. What can be harder than that?

We've lived on our investments for 6 years now and despite a rocky start (2008-09) we stuck to our plan (more or less) and feel a lot more confident now. Of course, we keep a close watch and are flexible in our spending.

 

[nun]

@Wave3 - you're making your investing life a lot harder than it needs to be.

+1. The prognostications and reports in the media hinder rather than help when investing. There's a lot of numerology in stock market/economic
analysis and I laugh at all the people who put any store in it.

 

[W2R]

@Wave3 - you're making your investing life a lot harder than it needs to be. Read Berstein, Malkiel and others about the futility of consistently predicting market returns correctly. Stay away from financial porn.

As others have said, we are lucky to be living in a time that investments are convenient and inexpensive. Pick an AA and stick to it using low cost, low turnover active or passive mutual funds and rebalance regularly. What can be harder than that?

We've lived on our investments for 6 years now and despite a rocky start (2008-09) we stuck to our plan (more or less) and feel a lot more confident now. Of course, we keep a close watch and are flexible in our spending.

+2

 

[ejman]

@Wave3 - you're making your investing life a lot harder than it needs to be. Read Berstein, Malkiel and others about the futility of consistently predicting market returns correctly. Stay away from financial porn.

As others have said, we are lucky to be living in a time that investments are convenient and inexpensive. Pick an AA and stick to it using low cost, low turnover active or passive mutual funds and rebalance regularly. What can be harder than that?

We've lived on our investments for 6 years now and despite a rocky start (2008-09) we stuck to our plan (more or less) and feel a lot more confident now. Of course, we keep a close watch and are flexible in our spending.

+3. I retired at the end of 2002 at age 52 and have been living comfortably on a diversified 50/50 portfolio of mostly Vanguard funds. Net worth has more than doubled since I retired. I turned off the financial porn a long time ago. Life much better as a result.

 

[Independent]

Wanted to switch topics: Has Investing Become Harder?

Question please: Can ER's get a decent return at low risk somewhere? Something more than 1% saving account. How about buy the markets with EFT's? Annuities while appealing have custodial risk which concerns me.

There was a window when it appeared a conservative investor could get a "decent" return on a post-retirement portfolio.

For the first four years that TIPS were available, both the 10 and 30 year bonds had coupons over 3%. I was in my 50's in those days, and could reasonably say that I would eventually retire with laddered TIPS that would have no inflation or market risk. If we kept our spending down to around 3% of initial (or current) portfolio, we'd never spend principal.

Of course, that's not possible today. So investing has gotten harder from that perspective.

 

[rjohnla]

From walkinwood through Independant. Thank you all for the advise I will certainly take it under advisement, because it's a struggle for me, because that's what I made it, it seems.

Thanks All

 

[mpeirce]

> Unfortunately, many people usually through no fault of their own, don't have a clue about finances.

It's true many folks don't have a clue, but in most cases it IS their own fault.

If someone is going to invest in equities, it's irresponsible to not take a little time and learn about them first. Reading a book or two or even just reading some good articles can get anyone started.

My father lost a modest fortune during his life. And yes, it was his own fault for not taking the time to learn about investing before doing so. Now he lives on social security and the remains of a small inheritance.

My in-laws on the other hand also knew nothing about investing. So they saved - in a bank. And paid off their house. And never ran up big debts. And they had plenty of money to support themselves in their later years.

I just get annoyed when people who should take responsibility for their own actions don't.

 

[rjohnla]

Hi MPierce, yes, people need to educate themselves, or bye-bye money. Little different for me, probably overkill, BA Fin, MBA, Intl. Fin. Plus researching and reading since 1986 got myself into what seems to be risk paralysis. How I don't know. Maybe too much info.

Think Personal Finance Lite should be required in HS & College for non-business majors.

Like: "My in-laws on the other hand also knew nothing about investing. So they saved - in a bank. And paid off their house. And never ran up big debts. And they had plenty of money to support themselves in their later years"

Last: Never used an investment advisor, just does not make me comfortable based on what they have said when was looking for one.

Thanks