Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Most Humbling
Old 03-02-2009, 06:26 PM   #1
Recycles dryer sheets
 
Join Date: May 2007
Posts: 148
Most Humbling

I suppose that I have always considered myself to be relatively knowledgebale about the markets and investing. I am 46 now, and since I got my first job out of college, I have been dollar cost averaging into low cost index funds for my 401-K, IRA's etc. I always "knew" that in the long run equities were the place to be, and that I would be rewarded for taking staying the course (to parapharase my friends at Vanguard). Along the way, I remember scoffing, laughing to myself as I heard my coworkers and friends speak about investing their retirement monies in CDs, short term Treasuries, and the like. I "knew" that they would ultimately find themselves in a positon of having too little capital to adeqautely fund their retirement, because of their failure to see the relationship between risk and reward. Over thee years I had accumulated a pretty substantial sum of money--obviously the recent losses have set me back considerably. Frankly, with my large exposure to equities, I am embarrassed to say how much I have lost, but suffice it to say is the hundreds of thousands of dollars. But looking back on it now, the thing that strikes me most is the contempt (best word I can think of) I had for those who failed to see the way to financial secuirty was through the long term investing in equities. Is it really the best way?---I think the answer is mostly "yes", but depending on when you pass thorugh this life, the answer may be "no". In retrospect, I should have had more respect for those who were "afraid" of the market, not because they were right (atleast it appears so now), but because it showed me I did not have enough repsect for the risks involved with investing. The fact that something is 90% certain, does not make it certain. I should have been more understanding of their concerns, perceptions of risk, and not assumed that "my" way was the best way.
__________________

__________________
stephenandrew is offline   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 03-02-2009, 06:41 PM   #2
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Quote:
Originally Posted by stephenandrew View Post
I should have been more understanding of their concerns, perceptions of risk, and not assumed that "my" way was the best way.
Hmm. Maybe.

Say they invested at 5% for 25 years, and you invested at 11% for 25 years. Say you all invested 25K per year just to keep it simple.

They end up with 1.2mm.

You end up with 2.8mm. Discount that 50% (really less if you are diversified, but let's assume all stocks) for the current recession. With 1.4mm to their 1.2mm you still win.
__________________

__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Old 03-02-2009, 06:47 PM   #3
Thinks s/he gets paid by the post
Free To Canoe's Avatar
 
Join Date: May 2008
Location: Cooksburg,PA
Posts: 1,738
Quote:
Originally Posted by stephenandrew View Post
..Frankly, with my large exposure to equities, I am embarrassed to say how much I have lost, but suffice it to say is the hundreds of thousands of dollars....
Welcome to the multiple $100k club. Consider yourself a dues paying member, like many on the board.

IMHO the best I can figure, the "safety first" crowd (Ben Graham Warren Buffett) knows how investing works and the others (many, many of them) are less knowledgeable.
Just what exactly does safety first mean? I am still learning.

I too am humbled and frankly, nothing short of this economic collapse would have changed my mind. It is a good time to learn. While the pain is still fresh. Is that a silver lining I see?

Mr. Upbeat
__________________
Free To Canoe is offline   Reply With Quote
Old 03-02-2009, 06:55 PM   #4
Thinks s/he gets paid by the post
 
Join Date: Oct 2008
Location: Naples
Posts: 2,161
Quote:
Originally Posted by Rich_in_Tampa View Post
Hmm. Maybe.

Say they invested at 5% for 25 years, and you invested at 11% for 25 years. Say you all invested 25K per year just to keep it simple.

They end up with 1.2mm.

You end up with 2.8mm. Discount that 50% (really less if you are diversified, but let's assume all stocks) for the current recession. With 1.4mm to their 1.2mm you still win.
See your logic Rich, but the 11% you use is questionable. I've heard that the market has returned on average 8% since its inception. That was some years back and don't know how recent trends have affected that average. Are there any recent figures published?
__________________
JOHNNIE36 is offline   Reply With Quote
Old 03-02-2009, 07:02 PM   #5
Thinks s/he gets paid by the post
frayne's Avatar
 
Join Date: Oct 2002
Location: 19th Hole
Posts: 2,531
Anyone who has any percentage of their portfolio in equities, and no matter how well diversified, has been humbled by the events of the past year. And like Free to Canoe said, welcome to the multiple $100K loss club, our membership continues to grow, daily.
__________________
A totally unblemished life is only for saints.
frayne is offline   Reply With Quote
Old 03-02-2009, 07:30 PM   #6
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 2,951
Quote:
Originally Posted by JOHNNIE36 View Post
See your logic Rich, but the 11% you use is questionable. I've heard that the market has returned on average 8% since its inception.

This was my initial reaction also, but then recalled 10.6 being the long term rate for SP500 since 1926 or something, so 80/20 would give you ~8% overall.

Anyway...yes humbling and somewhat betrayed. Every bond fund and CD I hold now looks golden. My noble side says I am lucky to have some recovery time and remember how this market feels and learn from it. My tension is towards the folks who proclaimed "might as well spend it now!!!" It seems their philosophy is besting my diligent saving and moderately aggressive equity allocation.
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
jazz4cash is offline   Reply With Quote
Old 03-02-2009, 07:43 PM   #7
Recycles dryer sheets
ikubak's Avatar
 
Join Date: Dec 2007
Posts: 391
There are times when cash outperforms stocks. Right now, people earning 2 or 3% in cash look like the geniuses, but most of the time, stocks outperform cash. One day, stocks will be leading the way again.
__________________
Retire date Jan. 10, 2018
ikubak is offline   Reply With Quote
Old 03-02-2009, 07:53 PM   #8
Thinks s/he gets paid by the post
 
Join Date: Aug 2002
Posts: 1,322
Quote:
Originally Posted by Rich_in_Tampa View Post
Hmm. Maybe.
With 1.4mm to their 1.2mm you still win.
Yes, but on the other hand... suppose you only need 1.2mm to retire comfortably. The CD/MM investor obtained their goal at 0 risk and slept well, whereas the equities investor came out a bit ahead but at much higher risk and sleepless nights.

I say this with 20/20 hindsight, since if the market was booming I'd be feeling pretty silly.
__________________
FinallyRetired is offline   Reply With Quote
Old 03-02-2009, 08:31 PM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Dawg52's Avatar
 
Join Date: Feb 2005
Location: Central MS/Orange Beach, AL
Posts: 7,438
Well the thing is......most all of us either worked or still work for corporations that have 401k plans. And most all 401k investment advisers recommend a balance portfolio with equities. It has just been considered part of a good plan. I would love to have been smart enough to follow my parents lead and just go the cd route over the years. But I bought into the 'balance portfolio' theme and now I am paying the price.

We could very well be headed for a depression. I have heard a couple say we are already in one. Stocks may not come back for 20 plus years. I may be dead before stocks come back. But I know one thing, I'll go to my grave with a balanced portfolio.
__________________
Retired 3/31/2007@52
Full time wuss.......
Dawg52 is offline   Reply With Quote
Old 03-02-2009, 08:32 PM   #10
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Quote:
Originally Posted by JOHNNIE36 View Post
See your logic Rich, but the 11% you use is questionable. I've heard that the market has returned on average 8% since its inception. That was some years back and don't know how recent trends have affected that average. Are there any recent figures published?
Someone smarter than I am will probably set us straight, but I recall the market did over 10% on average with dividends reinvested, 8% without and, of course, the average investor's return was lower because they can't resist buying, selling, and paying high expense ratios.
__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Old 03-02-2009, 08:44 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Ed_The_Gypsy's Avatar
 
Join Date: Dec 2004
Location: the City of Subdued Excitement
Posts: 5,293
Quote:
...suppose you only need 1.2mm to retire comfortably.
I sure better be able to be comfortable on a lot less than that.
__________________
my bumpersticker:
"I am not in a hurry.
I am retired.
And I don't care how big your truck is."
Ed_The_Gypsy is offline   Reply With Quote
Old 03-02-2009, 11:43 PM   #12
Thinks s/he gets paid by the post
DblDoc's Avatar
 
Join Date: Aug 2007
Posts: 1,224
Quote:
Originally Posted by Rich_in_Tampa View Post
Someone smarter than I am will probably set us straight, but I recall the market did over 10% on average with dividends reinvested, 8% without and, of course, the average investor's return was lower because they can't resist buying, selling, and paying high expense ratios.
The confusion may lie in the difference between 10-11% nominal return vs 7-8% real return

DD
__________________
DblDoc is offline   Reply With Quote
Old 03-03-2009, 08:29 AM   #13
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by Free To Canoe View Post
Welcome to the multiple $100k club. Consider yourself a dues paying member, like many on the board.
Member of the 200 Club checking in... (sigh)
__________________
"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 03-03-2009, 08:49 AM   #14
Thinks s/he gets paid by the post
OAG's Avatar
 
Join Date: Jun 2006
Location: Central, Ohio, USA
Posts: 2,598
Quote:
Originally Posted by stephenandrew View Post
I suppose that I have always considered myself to be relatively knowledgebale about the markets and investing. I am 46 now, and since I got my first job out of college, I have been dollar cost averaging into low cost index funds for my 401-K, IRA's etc. I always "knew" that in the long run equities were the place to be, and that I would be rewarded for taking staying the course (to parapharase my friends at Vanguard). Along the way, I remember scoffing, laughing to myself as I heard my coworkers and friends speak about investing their retirement monies in CDs, short term Treasuries, and the like. I "knew" that they would ultimately find themselves in a positon of having too little capital to adeqautely fund their retirement, because of their failure to see the relationship between risk and reward. Over thee years I had accumulated a pretty substantial sum of money--obviously the recent losses have set me back considerably. Frankly, with my large exposure to equities, I am embarrassed to say how much I have lost, but suffice it to say is the hundreds of thousands of dollars. But looking back on it now, the thing that strikes me most is the contempt (best word I can think of) I had for those who failed to see the way to financial secuirty was through the long term investing in equities. Is it really the best way?---I think the answer is mostly "yes", but depending on when you pass thorugh this life, the answer may be "no". In retrospect, I should have had more respect for those who were "afraid" of the market, not because they were right (atleast it appears so now), but because it showed me I did not have enough repsect for the risks involved with investing. The fact that something is 90% certain, does not make it certain. I should have been more understanding of their concerns, perceptions of risk, and not assumed that "my" way was the best way.
Yes, I am one of those you held in "contempt" - Virtually, never in the Stock Market (no 401k do have a DB retirement). I can not post numbers like Rich did, as there were times I pulled money out to purchase homes (3 times) for CASH. But, suffice it to say I have 3 virtually EQUAL legs on my retirement "stool" - SS, Military Retirement, and CD's. Frankly, I am totally "risk adverse" and the gyrations of the stock market over the past 30 years has always scared me off.
__________________
Vietnam Veteran, CW4 USA, Retired 1979
OAG is offline   Reply With Quote
Old 03-03-2009, 08:54 AM   #15
Thinks s/he gets paid by the post
 
Join Date: Aug 2002
Posts: 1,322
What OAG said.
__________________
FinallyRetired is offline   Reply With Quote
Old 03-03-2009, 10:39 AM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
TromboneAl's Avatar
 
Join Date: Jun 2006
Posts: 11,198
Well put, Stephen, I've been having the same thoughts. Your Money or Your Life is an example of a book I admired but considered that its investing strategy (US Treasuries) was too conservative.

We also have to admit that Kramer's Oct 6 statement to get out of the market was reasonable:


OTOH we have to distinguish between bad decisions and good decisions with bad outcomes. A 60/40 asset allocation was a good decision based on all available data (and probably still is). But stuff happens.
__________________
Al
TromboneAl is offline   Reply With Quote
Old 03-03-2009, 10:47 AM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
dex's Avatar
 
Join Date: Oct 2003
Posts: 5,105
[quote=TromboneAl
OTOH we have to distinguish between bad decisions and good decisions with bad outcomes. A 60/40 asset allocation was a good decision based on all available data (and probably still is). But stuff happens.[/quote]

Excellent point.
What we are taking about is a bit of buyers remorse.
We bought into a investment strategy and we are losing.

I thought and do think Kramer is not the type of person I would listen to regarding my investments. That he was right a few months ago should play into my thinking now.

Last Jan/Feb. I thought that this decline would be in the 20% range. I didn't get out then because I was averaging into the market at the time, thinking long term and OK within the context of my plan.
__________________
Sometimes death is not as tragic as not knowing how to live. This man knew how to live--and how to make others glad they were living. - Jack Benny at Nat King Cole's funeral
dex is offline   Reply With Quote
Old 03-03-2009, 11:12 AM   #18
gone traveling
 
Join Date: May 2008
Posts: 3,864
Quote:
Originally Posted by ziggy29 View Post
Member of the 200 Club checking in... (sigh)
My losses passed a great bowling score and are now closer to a great MLB batting average....
__________________
Westernskies is offline   Reply With Quote
Old 03-03-2009, 01:14 PM   #19
Recycles dryer sheets
 
Join Date: May 2007
Posts: 148
Quote:
Originally Posted by TromboneAl View Post
OTOH we have to distinguish between bad decisions and good decisions with bad outcomes. A 60/40 asset allocation was a good decision based on all available data (and probably still is). But stuff happens.
Agreed--sometimes we make the right decisions, but things don't work out. But I guess my main point is that I was dismissive of the potential level of market risk. Frankly, I never believed that it would be possible to incurr this kind of loss, which just reflects my ignorance I suppose. Maybe more than anything I am just venting, reflecting on the fact that given my age, and the amount of capital lost, that I may, in fact, have to start making some other plans regarding my future retirement, e.g. working longer. Its almost funny now, but when I projected out what I would have at age 56 with my excel worksheets, I used a "conservative" 7% annual gain for the next 10 years. My spreadsheet looks a little different now. Sorry for the moaning--yes, I know things could be worse---much worse. Fortunately for me (and I suspect most of you), investment returns are only one componet of financial success. Since we have no debt except a mortgage that will be paid off in May 2010 ($35,000 balance), things will be (should be?) fine. Maybe the real lesson here is that you can't control investment returns, but you can always LBYM.
__________________
stephenandrew is offline   Reply With Quote
Old 03-03-2009, 01:35 PM   #20
Full time employment: Posting here.
Lusitan's Avatar
 
Join Date: Jan 2006
Location: Boston
Posts: 620
Quote:
Originally Posted by stephenandrew View Post
Maybe the real lesson here is that you can't control investment returns, but you can always LBYM.
Yeah. LBYM really helps when it comes to rolling with the punches, whether its a job loss or a market crash. Knowing how to get by with less really is important.
__________________

__________________
Lusitan 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


 

 
All times are GMT -6. The time now is 12:31 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.