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Old 09-28-2012, 11:06 AM   #41
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+ 1. Another comforting thought is that even after the Great Depression although the Dow Jones took over 20 years to regain its prior level, it took less than a decade if one includes dividends and other factors. The Great Depression “25-Year Recovery” Myth | The Guru Investor
I think it is great to be optimistic and I try to be too.

But ...
1) If you were retired in the 1930's you'd have been spending during that depression. So it would have not been such an easy recovery. Firecalc spreadsheet can show how it might have been for each of us.

2) What came after that recovery assuming you did not spend in retirement? A major recession in 1938. Then there was WW2 with a huge market drop in May 1940 (Nazi invasion of France).

History does not exactly repeat (thank goodness).
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Old 09-28-2012, 11:41 AM   #42
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You may have been too heavy in stocks ( 100% maybe ? ). I like this article from Paul Merriman at fundadvice. With a 30% stock allocation you capture most of the return with much less volitility. See chart 7

FundAdvice.com - The perfect portfolio

Time in the market generally works to recover your losses; but it works better when younger, still working with an income to recoup the loss. After retirement our time horizon is shorter. not as much time to wait on a recovery.
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Old 09-28-2012, 11:46 AM   #43
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Originally Posted by Lsbcal
I think it is great to be optimistic and I try to be too.

But ...
1) If you were retired in the 1930's you'd have been spending during that depression. So it would have not been such an easy recovery. Firecalc spreadsheet can show how it might have been for each of us.

2) What came after that recovery assuming you did not spend in retirement? A major recession in 1938. Then there was WW2 with a huge market drop in May 1940 (Nazi invasion of France).

History does not exactly repeat (thank goodness).
It was a lot better to retire in 1935 than in 1928, and so far it's been better to retire in 2009 than in 1999.
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Old 09-28-2012, 11:48 AM   #44
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I FIRE'd in Jan of 2008 before the big meltdown. My only regret of not still w*rking was not having income from a salary to continue DCA'ing into the market that was going down, down and more down. When the market tanks, I change my mindset to think of all the shares I can buy instead of how my investments are taking a dive.
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Old 09-28-2012, 11:49 AM   #45
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It was a lot better to retire in 1935 than in 1928, and so far it's been better to retire in 2009 than in 1999.
As one of the few 2009 retirees here, I have no complaints. Just wish I could have retired earlier.

Not many of us seemed to retire in 2009, though. We never even had a "Class of 2009" thread. Maybe I'll start one.
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Old 09-28-2012, 12:17 PM   #46
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You may have been too heavy in stocks ( 100% maybe ? ). I like this article from Paul Merriman at fundadvice. With a 30% stock allocation you capture most of the return with much less volitility. See chart 7

FundAdvice.com - The perfect portfolio

Time in the market generally works to recover your losses; but it works better when younger, still working with an income to recoup the loss. After retirement our time horizon is shorter. not as much time to wait on a recovery.
That chart is for 1970 to 2008. The bond bull market started around 1982 and continues up to today. I'd be surprised if the next decades give that same risk/return graph. It would be interesting to see the same graph for maybe 1940 to 1970.

Here is a real return graph showing the great bond returns in recent decades (only goes up to 2001). Note the poor returns prior to 1982. Rates can only go down just so far.

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Old 09-28-2012, 12:42 PM   #47
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That chart is for 1970 to 2008. The bond bull market started around 1982 and continues up to today. I'd be surprised if the next decades give that same risk/return graph. It would be interesting to see the same graph for maybe 1940 to 1970.

Here is a real return graph showing the great bond returns in recent decades (only goes up to 2001). Note the poor returns prior to 1982. Rates can only go down just so far.
It's interesting to see that even in the rising rate environment of the 70's and early 80's certain balanced funds (Uncle Mick's pssst) did OK even with the bonds dragging performance (scroll to lower part of page for Wellesley's early performance) Of course, history never repeats exactly. VWINX Performance Overview | VANGUARD WELLESLEY INCOME FUND Stock - Yahoo! Finance
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Old 09-28-2012, 01:59 PM   #48
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It's interesting to see that even in the rising rate environment of the 70's and early 80's certain balanced funds (Uncle Mick's pssst) did OK even with the bonds dragging performance (scroll to lower part of page for Wellesley's early performance) Of course, history never repeats exactly. VWINX Performance Overview | VANGUARD WELLESLEY INCOME FUND Stock - Yahoo! Finance
Interesting point. I wonder how the stock/bond allocation has varied over those years for VWINX. I notice it is now 40/60 stocks/bonds.

After writing the above I found this from Bogle on VWELX:
http://johncbogle.com/speeches/JCB_WMC1203.pdf
Should be required reading for those owning a hunk of this fund.
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Old 09-28-2012, 03:18 PM   #49
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During my accumulation years I relied on what someone once called the "gastronomic indicator": if I looked at my portfolio and truly felt like vomiting, I'd do everything I could to buy stocks immediately.
Did you happen to sell stocks when you looked at your portfolio and felt like doing this: ?
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Old 09-28-2012, 04:22 PM   #50
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Did you happen to sell stocks when you looked at your portfolio and felt like doing this: ?
Nah. I hate selling stocks (in my case, index funds). I would make a lousy trader.
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Old 09-28-2012, 05:03 PM   #51
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Did you happen to sell stocks when you looked at your portfolio and felt like doing this: ?
Yes, but I am too timid to make major moves (% wise). Looking at my tracking spreadsheet, my % of assets in equities hit a high of 66.6% on April 27, 2007. By December 2007 I had it down to about 60%, even though equities were higher. I can still remember being in a car with some other folks from w*rk, discussing the rising stock market and property prices, and them thinking I had lost my mind because I said I was selling some stuff.

The problem was I should have gone from 67% to 30%, not 67 to 60! During the 2008/09 debacle, the % of equities continued to go down, not because I was selling, but because stocks were going down so fast. So even though I was putting money to work, it wasn't enough to offset the beating I was taking. As of recently, I'm about at the 60% mark.

The fact that I'm not at 100% (and never have been) is also part of my being able to sleep at night. The 40% is in a variety of things...inflation adjusted debt, a bit left in Penfed 6.25% CD, and unfortunately a bunch of cash. I'm just not willing to put the cash into any type of longer term fixed instrument at this point...
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Old 09-28-2012, 05:32 PM   #52
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Buy it when they're crying, sell when they're yelling is a time-tested adage. Or just buy steadily at all times and not worry about selling ever. I'm too obsessed to go that route though.
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Old 09-29-2012, 06:42 AM   #53
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Somehow the thought of the SEC trying to regulate themselves does not fill me with confidence. They have such a splendid recent track record...
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Old 09-29-2012, 02:18 PM   #54
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+ 1. Another comforting thought is that even after the Great Depression although the Dow Jones took over 20 years to regain its prior level, it took less than a decade if one includes dividends and other factors. The Great Depression “25-Year Recovery” Myth | The Guru Investor
This is scant comfort for retired person, who is at least consuming his dividends and perhaps more, just to live.

Ha
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Old 09-29-2012, 02:49 PM   #55
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This is scant comfort for retired person, who is at least consuming his dividends and perhaps more, just to live.
Seems to me it could be quite a comfort. Mark Hulbert's article says:
Quote:
An investor who invested a lump sum in the average stock at the market’s 1929 high would have been back to a break-even by late 1936 — less than four and a half years after the mid-1932 market low.
Now, no one knows what the next downturn will look like, but this one featured a dose of deflation which, together with dividends, were important factors in restoring the value of equities. If a retiree is worried about the same thing happening again, then holding 7 years worth of cash-equivalents (approx 28% of a typical portfolio) would allow them to see the crash-and-recovery through and thereby avoid selling any stocks at a loss.

What about other downturns? From the same article:
Quote:
In fact, according to a Hulbert Financial Digest study of down markets since 1900, the average recovery time is just over two years, when factors like inflation and dividends are taken into account. The longest was the recovery from the December 1974 low; it took more than eight years for the market to return to its previous peak, which was reached in late 1972.
So, 10 years of cash (or income from bond coupons, an annuity, etc) would cover the longest equity decline ("peak-to-peak") in modern US history. And, usually, it takes far less than that, just a few year's worth. Some folks might find that comforting enough that they decide on an equity allocation with enough stocks to allow them to keep up with inflation over the long term. That's a "win".
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Old 09-29-2012, 03:21 PM   #56
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Seems to me it could be quite a comfort. Mark Hulbert's article says:
Now, no one knows what the next downturn will look like, but this one featured a dose of deflation which, together with dividends, were important factors in restoring the value of equities. If a retiree is worried about the same thing happening again, then holding 7 years worth of cash-equivalents (approx 28% of a typical portfolio) would allow them to see the crash-and-recovery through and thereby avoid selling any stocks at a loss.
Super. I am glad that you are conforted. The more happy people around the better.

Ha
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Old 09-29-2012, 04:02 PM   #57
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This is scant comfort for retired person, who is at least consuming his dividends and perhaps more, just to live.

Ha
I think that in the context of most of the people at this forum who are either ER/FI or well on their way, its quite comforting to realize that in the inmortal words of Spiro Agnew the"nattering nabobs of negativism" don't necessarily have to carry the day. A deep recession, even a depression is not the end of the world.
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Old 09-29-2012, 11:01 PM   #58
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I think that in the context of most of the people at this forum who are either ER/FI or well on their way, its quite comforting to realize that in the inmortal words of Spiro Agnew the"nattering nabobs of negativism" don't necessarily have to carry the day. A deep recession, even a depression is not the end of the world.
Love slogans, do you?

Ha
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Old 09-29-2012, 11:19 PM   #59
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So, 10 years of cash (or income from bond coupons, an annuity, etc) would cover the longest equity decline ("peak-to-peak") in modern US history. And, usually, it takes far less than that, just a few year's worth. Some folks might find that comforting enough that they decide on an equity allocation with enough stocks to allow them to keep up with inflation over the long term. That's a "win".
That's part of my strategy. When things got really bad in late 2008/early 2009, and I had to rebalance and sell bonds to buy stocks, I wouldn't let my fixed income portion drop below 12 years expenses even though it limited me to 55% equity allocation at the time. That way I could rebalance and still sleep at night.

I pay a bit "fast and lose" in that I consider my entire fixed income in that "cash equivalent" crash survival category but the fact is that a good chunk of it is high quality enough to be there for withdrawals if needed during a long equity recovery.
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Old 09-30-2012, 01:21 AM   #60
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So, 10 years of cash (or income from bond coupons, an annuity, etc) would cover the longest equity decline ("peak-to-peak") in modern US history. And, usually, it takes far less than that, just a few year's worth. Some folks might find that comforting enough that they decide on an equity allocation with enough stocks to allow them to keep up with inflation over the long term. That's a "win".
*Ahem.*

Works especially well on a military pension (COLA'd annuity).
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