Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 12-29-2011, 09:41 AM   #81
Thinks s/he gets paid by the post
Nemo2's Avatar
 
Join Date: May 2011
Location: Belleville, ONT
Posts: 4,317
Quote:
Originally Posted by Texas Proud View Post
I say 'yes, you have LOST it, now what do you want to do going forward'....
+1

As far as I'm concerned this "You haven't lost it until you sell" is a totally invalid truism.
__________________

__________________
"Exit, pursued by a bear."

The Winter's Tale, William Shakespeare
Nemo2 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 12-29-2011, 03:59 PM   #82
Recycles dryer sheets
 
Join Date: Dec 2006
Posts: 291
Quote:
Originally Posted by Nemo2 View Post
+1

As far as I'm concerned this "You haven't lost it until you sell" is a totally invalid truism.
Ditto
__________________

__________________
bubba is offline   Reply With Quote
Old 12-29-2011, 03:59 PM   #83
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,403
Having owned a lot of individual stocks over the years, I have seen plenty of price fluctuations that I have become somewhat jaded. A 25% drop, not necessarily from my purchase price but even from a recent high, should be cause of concern for me. A drop of 50% would be very alarming, and often meant a permanent loss, and quite often an eventual total loss, meaning bankruptcy.

The above only applies to individual stocks, not one's entire portfolio. If the latter drops 25%, that should be enough to cause one's sleepless nights! Diversify, diversify, dummy...

The above said, I will admit that in the tech stock rout of 2000-2003, I "lost" as much as 40% from March 2000 top to March 2003 low. Well, I recovered, but I swore to myself, never again! In the drop from 2007 to 2009, I was doing a bit more aggressive preemptive selling, and fared a bit better. Top to bottom, I suffered a "loss" of less than 25% of total portfolio, which has been also recovered.

I don't blame people who could not stand the heat of the kitchen and stay out. :-)
__________________
"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 12-29-2011, 05:04 PM   #84
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
Quote:
Originally Posted by NW-Bound View Post
I don't blame people who could not stand the heat of the kitchen and stay out. :-)
Nothing wrong with the heat of the kitchen, as long as you've got a lounge chair and a tall one in an air conditioned room.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 12-29-2011, 06:08 PM   #85
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
Quote:
Originally Posted by Texas Proud View Post

Now, you are correct that if you own 1 billionth of a company today and the stock price goes down, your ownership of the company does not change... but if the price of your company goes down 50% today.... you lost 50% in value... sure, tomorrow it might go right back up, but it might not... you have to make your decision of should I keep my money in this stock or move it to another.... what is my best option today... most of the time it is to leave it where it is...

But would you agree that Netflix has lost value this year IOW, the true value of the stock is lower... if so, then would someone who bought it at $300 per share have lost value even though he has not sold the stock I think the answer is yes, he has lost value... and I would be hard pressed to understand anybody who said no, he has not lost value... (the stock is selling at about $68 now)....
A couple of points. First I agree that refusing to recognize that value of an investment has changed has cause many people to lose a lot of money by holding on to loser. Netflix or Enron are prime examples of situation I AM NOT talking about. Enron books were cooked and once that fact was discovered the price rapidly approached the value. Netflix stock was clearly overvalue in $250+ price which is why I shorted it and made money. In addition this year management did a series of things that were stupid which reduced customer good will and the intrinsic value of the company. The combination of being over valued to start with and lower intrinsic value accounts for much of the reason that price Netflix is down 75% from its peak.

I don't believe in an efficient market over the short term. In particular I think price fluctuations are far more dramatic than actual changes in intrinsic value.

When the price of a stock declines in many cases (and probably most cases for an individual stock) it is because the value (as defined by the present value of the future dividend payments) declined. An easy to understand example is a heavily regulated utility in a slow growth area. It pays a 4% dividend that increases very slowly. If interest rates rise such that you can get 4% in 3 year CD or a TIP bond, the value of the dividend of the utility is much lower. After all the utilities nuclear power plant could melt down and you can kiss your dividend goodbye. The stock price should decline so that the utilities has a higher yield that 4%.

Where we disagree is when you say that if the price declines you HAVE lost value. In some cases yes, but not necessarily Value using Graham's definition. As somebody who depends primarily dividends to fund my retirement I don't worry about daily or even annual price fluctuations cause unless the current/future dividends of my stocks change I haven't lost anything. I'd be perfectly happy if they closed all stock markets for the next 5 years. Although I'd miss watching some of the cuties on CNBC and doing stock research . So if there wasn't stock market trading, what would the value of my stocks be? How would you know if it went up or down?

I'd argue that price is not equal to value is especially true in the case of broad based mutual funds/etf with high levels of volatility. Nothing fits this definition better than an Emerging Market Index fund like the OP was talking about. If we look at Vanguards (VWO), the returns were 2006 29% 2007 37% 2008 -53% 2009 +75% 2010 +19% 2011 -22%. VWO is $45 billion dollar fund which owns stock in 873 mostly big ($15 billion average market cap) in scores of different countries. Now the economic collapse of 2008 absolutely hurt the intrinsic value of most companies in a big way, but I am hard press to believe that changes were as dramatic as the price changes suggest. I don't know which is crazier the 53% drop in 2008, or the 75% gain in 2009. I am sure there is an Enron or three among the 873 companies, and no doubt a few scores of managers like Netflix's team but I am positive the true value of this fund doesn't change that dramatically every year.

I guess my main point is that stomaching the crazy price swings is a lot easier if people remember that what they really own when the buy a fund like this is ownership position in lots of good business, and rights to future profits. I realize that this is foreign concept to the public at large, but I do think forum members can actually help with the education process in situations like parties. Especially if your football team is out of the running....
__________________
clifp is offline   Reply With Quote
Old 12-29-2011, 06:19 PM   #86
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,403
Quote:
Originally Posted by nun View Post
Nothing wrong with the heat of the kitchen, as long as you've got a lounge chair and a tall one in an air conditioned room.
Some people are happy to stay in the lounge chair and wait to be served whatever gets cooked up in the kitchen. Some others like to do the cooking themselves, and are willing to take the risk of getting eye brows singed .

Well, what's the end result? Is it "good eats"? Hard to tell. Some years, a perfectly seared steak. Some other years, burned rice.
__________________
"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 12-29-2011, 06:43 PM   #87
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
Quote:
Originally Posted by NW-Bound View Post
Some people are happy to stay in the lounge chair and wait to be served whatever gets cooked up in the kitchen. Some others like to do the cooking themselves, and are willing to take the risk of getting eye brows singed .
Why can't anyone see that I'm advocating a balance between the kitchen and the lounge chair. Having the lounge chair gives you somewhere safe to be if you burn something in the kitchen.

To stop the analogies for a second. Having a good foundation of savings that can produce some income actually lets me be a better investor. I hope that the CD ladder will be worth investing in sometime soon. I look longingly to the UK where you can still get a tax free, 5 year, savings account at 4.5% interest.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 12-29-2011, 06:56 PM   #88
Thinks s/he gets paid by the post
steelyman's Avatar
 
Join Date: Feb 2011
Location: Triangle
Posts: 3,218
Isn't this really just the usual asset allocation discussion? People talk/write all the time about their stock/bond/cash allocation, and each have their preferences. If yours is 0/0/100, then that's OK if it works for you.
__________________
steelyman is offline   Reply With Quote
Old 12-29-2011, 06:57 PM   #89
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,403
Quote:
Originally Posted by nun View Post
Why can't anyone see that I'm advocating a balance between the kitchen and the lounge chair. Having the lounge chair gives you somewhere safe to be if you burn something in the kitchen.

To stop the analogies for a second. Having a good foundation of savings that can produce some income actually lets me be a better investor. I hope that the CD ladder will be worth investing in sometime soon. I look longingly to the UK where you can still get a tax free, 5 year, savings account at 4.5% interest.
OK, I get you now. Talk about dashing in and out of the hellish kitchen

Well, among the "safe" things I have are the I-bond accounts, and having missed the really good deal around 2000, mine do not pay me that much, and that is even before taxes (deferred until when I withdraw). I also have money in other short-term interest-paying accounts.

I do try to play the "barbell" strategy, meaning instead of indexing to be in the middle, I would try to have part of my money safe, so that I can take more risk with the other half. Well, as I reported earlier, it has been a mixed result.

When I get bored with all this, will just put it all in Wellesley or Wellington...
__________________
"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 12-29-2011, 09:09 PM   #90
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
Quote:
Originally Posted by NW-Bound View Post
OK, I get you now. Talk about dashing in and out of the hellish kitchen
My point in starting all this was to bemoan the lack of emphasis that is place on saving today, rather than trash other investments. Mutual funds are almost exclusively pushed in 401ks, etc and the financial media doesn't talk about the utility of CD ladders or products like TIAA-Traditional which i think will lead to a disaster for the baby boomers are those that come after.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 12-29-2011, 10:10 PM   #91
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Quote:
Originally Posted by nun View Post
My point in starting all this was to bemoan the lack of emphasis that is place on saving today, rather than trash other investments. Mutual funds are almost exclusively pushed in 401ks, etc and the financial media doesn't talk about the utility of CD ladders or products like TIAA-Traditional which i think will lead to a disaster for the baby boomers are those that come after.
So it isn't saving if people don't buy your chosen investments? Now we are getting somewhere...
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Old 12-29-2011, 10:14 PM   #92
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,271
Quote:
Originally Posted by brewer12345 View Post
So it isn't saving if people don't buy your chosen investments? Now we are getting somewhere...
Confused? Me too!

Or maybe it's perfectly clear?

-ERD50
__________________
ERD50 is online now   Reply With Quote
Old 12-29-2011, 10:32 PM   #93
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
Quote:
Originally Posted by brewer12345 View Post
So it isn't saving if people don't buy your chosen investments? Now we are getting somewhere...
Exactly, at last someone understands
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 12-30-2011, 10:30 AM   #94
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,262
Quote:
Originally Posted by clifp View Post
A couple of points. First I agree that refusing to recognize that value of an investment has changed has cause many people to lose a lot of money by holding on to loser. Netflix or Enron are prime examples of situation I AM NOT talking about. Enron books were cooked and once that fact was discovered the price rapidly approached the value. Netflix stock was clearly overvalue in $250+ price which is why I shorted it and made money. In addition this year management did a series of things that were stupid which reduced customer good will and the intrinsic value of the company. The combination of being over valued to start with and lower intrinsic value accounts for much of the reason that price Netflix is down 75% from its peak.
But that is not what the average Joe thinks.... when you say 'I have not lost anything because I have not sold'.... the vast majority will think it applies to all situations... and when I have heard it from almost everybody it is relating to a bad stock pick they made....

Also, how do you know if the company you have invested is the next Enron or one of the other companies that crashed



Quote:
Originally Posted by clifp View Post
I don't believe in an efficient market over the short term. In particular I think price fluctuations are far more dramatic than actual changes in intrinsic value.

When the price of a stock declines in many cases (and probably most cases for an individual stock) it is because the value (as defined by the present value of the future dividend payments) declined. An easy to understand example is a heavily regulated utility in a slow growth area. It pays a 4% dividend that increases very slowly. If interest rates rise such that you can get 4% in 3 year CD or a TIP bond, the value of the dividend of the utility is much lower. After all the utilities nuclear power plant could melt down and you can kiss your dividend goodbye. The stock price should decline so that the utilities has a higher yield that 4%.
I also do not believe in an efficient market. But what about the value of a stock that does not pay dividends What is that reason for the change in value.






Quote:
Originally Posted by clifp View Post
Where we disagree is when you say that if the price declines you HAVE lost value. In some cases yes, but not necessarily Value using Graham's definition. As somebody who depends primarily dividends to fund my retirement I don't worry about daily or even annual price fluctuations cause unless the current/future dividends of my stocks change I haven't lost anything. I'd be perfectly happy if they closed all stock markets for the next 5 years. Although I'd miss watching some of the cuties on CNBC and doing stock research . So if there wasn't stock market trading, what would the value of my stocks be? How would you know if it went up or down?
Most companies are valued on the ability of them to earn profits going forward, not the dividends they pay. Again using real life example, there is GM, Citi (well, almost any bank), GE etc. etc.

I just took a look at GE... they paid a 31 cent dividend until Feb 2009. The next dividend was 10 cents. Did the value of GE go down by 2/3rd The stock had gone down from the $40s to $12 with the high dividend... then it went back up when the dividend was cut. I would say that GE price changed because people thought that they could not make the profit they had been making. But again, did someone 'lose value' under your definition if they had invested in GE even if they did not sell I would say yes... and even using your definition of PV of future dividends I would think you would say yes.... so the statement is false under this example... which IMO makes it false all the time...



Quote:
Originally Posted by clifp View Post
I'd argue that price is not equal to value is especially true in the case of broad based mutual funds/etf with high levels of volatility. Nothing fits this definition better than an Emerging Market Index fund like the OP was talking about. If we look at Vanguards (VWO), the returns were 2006 29% 2007 37% 2008 -53% 2009 +75% 2010 +19% 2011 -22%. VWO is $45 billion dollar fund which owns stock in 873 mostly big ($15 billion average market cap) in scores of different countries. Now the economic collapse of 2008 absolutely hurt the intrinsic value of most companies in a big way, but I am hard press to believe that changes were as dramatic as the price changes suggest. I don't know which is crazier the 53% drop in 2008, or the 75% gain in 2009. I am sure there is an Enron or three among the 873 companies, and no doubt a few scores of managers like Netflix's team but I am positive the true value of this fund doesn't change that dramatically every year.
I would suggest that the value of the EM did change because people's risk tolerance changed.... I will agree that the swings are probably more than the true underlying value of the companies, but that is part of the market... the emotion of people...





Quote:
Originally Posted by clifp View Post
I guess my main point is that stomaching the crazy price swings is a lot easier if people remember that what they really own when the buy a fund like this is ownership position in lots of good business, and rights to future profits. I realize that this is foreign concept to the public at large, but I do think forum members can actually help with the education process in situations like parties. Especially if your football team is out of the running....
I agree that the price swings can make a lot of people do things that they should not do... having an AA and investing in a broad range of mutual funds can help people ignore the ups and downs of the market.... but what I do not believe is making people try and feel good by making a statement that is not true... I tell them that you need to invest in the overall market and let your money work. I tell them what alternative investment do you have.... IOW, what is the best for you right now. Do not worry about the loss... it is done... let's look at today and tomorrow and make intelligent investments...
__________________
Texas Proud is offline   Reply With Quote
Old 12-30-2011, 10:46 AM   #95
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by nun View Post
My point in starting all this was to bemoan the lack of emphasis that is place on saving today, rather than trash other investments.
I don't know. For many years I heard financial planners and personal finance gurus bemoaning the pitiful savings rate. Of course now, we're being told that we're saving *too much*, which is sending us into a recession.

You can't win with the so-called experts. For most people I think saving (in the more traditional preservation of capital sense) and investing in equities have a place -- "traditional savings" to provide a cushion and an emergency fund to get you through a certain amount of time, and investing for long-term future growth. Not everyone can save 40-50% of their after-tax income or more, which might be what it takes to have enough with the -1% to +1% real return of "traditional savings" to finance a 30+ year retirement.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 12-31-2011, 04:13 PM   #96
Thinks s/he gets paid by the post
obgyn65's Avatar
 
Join Date: Sep 2010
Location: midwestern city
Posts: 4,061
Same for me. I have never been an investor. I am 100% in CDs, munis, cash or equivalent. Happy with my choices.
Quote:
Originally Posted by skipro3 View Post
Well, here I am, coming into my final year before retiring and coming out of the closet as a self proclaimed saver.
__________________
Very conservative with investments. Not ER'd yet, 48 years old. Please do not take anything I write or imply as legal, financial or medical advice directed to you. Contact your own financial advisor, healthcare provider, or attorney for financial, medical and legal advice.
obgyn65 is offline   Reply With Quote
Old 12-31-2011, 05:25 PM   #97
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,384
Quote:
Originally Posted by ERD50 View Post
+1 I don't know how people can say they want to get out of 'risky' stocks after they run and understand those scenarios. Seems the 'riskiest' thing you can do is drop your equity allocation too low.

-ERD50
I wouldn't be retired if I hadn't invested, and invested fairly well.

Everyone is different.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 12-31-2011, 05:43 PM   #98
Thinks s/he gets paid by the post
 
Join Date: Mar 2009
Posts: 1,433
Quote:
Originally Posted by haha View Post
I wouldn't be retired if I hadn't invested, and invested fairly well.

Everyone is different.

Ha
I see quite bit of the savings vs investing debate. Many advisors are now touting an ultra conservative approach. I prefer to "dance with the one that brought ya".
Sticking to my 45/40/15 conservative allocation.
__________________

__________________
Retired in 2016. Living off dividends / interest and a mini pension. Freedom.
foxfirev5 is offline   Reply With Quote
Reply


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
Interesting article on 'saving clubs' deserat FIRE and Money 7 11-22-2011 02:05 PM
Income investing and total return investing. clifp FIRE and Money 18 09-03-2011 10:17 AM
Clyatt, ETFs for Rational Investing Portfiolio? REattempt FIRE and Money 8 08-02-2011 04:48 PM
What percent of my income should I be saving in order to FIRE? nico08 FIRE and Money 23 07-06-2011 12:03 PM

 

 
All times are GMT -6. The time now is 09:35 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.