Need to start generating income from cash

[thedaily]

Quote:

Originally Posted by calmloki About 1 1/2 years ago I pulled everything out of the market and left it in Vanguard Prime money market, where it sat and made pretty much $0. During the course of last year I watched the market bouncing around and waited for it's big drop so I could buy on sale. Instead, the market kept trending up and by the end of the year was up about 30%. This year I've been plunking in about 2% of the Prime account into the market each week. Classic case of buy high, but I am not a good example of what to do, though going in gradually has been less painful than making a single big buy. I will say that the total stock market shares have done better than more volatile and higher expense other shares. Consider something else - maybe you aren't a stock market kind of person. I do well renting property and loaning money on property - way better than I do in the market. Maybe you have something you are good at that would work well for you. We don't all have to take the same path.

I think we feel the same way. At 14K, I was thinking it's going to have to pull back and now it's way up. I remember thinking it'll make it to 16K and it hit 16k. Now I'm sitting here thinking the same thing how can the market possibly hit 20K.

I need to trickle my money in. That probably would have definitely dampened the pullback for me.

I looked into buying in Tulsa. Had a friend do it. He got in on the bottom. When I started looking, prices rose and I crunched the numbers and it didn't seem to work. I'm an engineer by schooling even though I don't works as one. I tend to analyze and re-analyze everything.

[LV_Travel]

Then you have a real problem, which is the first thing you need to address. The problem is that you are emotionally not able to handle the volatility which is an integral part of investing.

"Over the last 100 years the stock market has experienced on average a 5% correction three times per year, a 10% correction once per year and a 20% correction once every three and a half years."

Here are some quotes to help you along.

"Following the path of least emotional discomfort is a road to failure."

"over the full market cycle, investing to achieve short-term comfort costs a fortune." -- John Hussman

“You need long-term strategies to reach long-term goals, and paying
attention to short-term fluctuations in the stock market is one of
the most destructive things you can do for your long-term financial
health.” -- Jim O’Shaughnessy

"Most investors do poorly, but it’s not because good investment methodologies are secret. It’s because they do not have the will to stay with a winning strategy during a period when it is under duress."


" investing is emotionally hard. You have to be willing to take short-term pain in the interests of long-term gain. No strategy works every month or year. Returns from valid strategies are most often lumpy. The markets are almost always lumpy." -- David Merkel alephblog.com

"Successful investing is emotionally difficult. It often requires waiting for long-term results when your portfolio was recently pummeled, recommending an investment when others think it is a dog, investing when volatility is high and, in general, looking and acting different from the crowd. To be a successful investor, you must make a conscious decision to redirect your natural impulses and focus on careful and thoughtful analysis."

"Fear is a stronger emotion than hope, which is why bear markets are always swifter than bull markets. The secret of making money in stocks is not to get scared out of them. Never bet on the end of the world, It only happens once." -- John Templeton

"More Money Has Been Lost Avoiding Risk Than at the Point of a Gun
Until you realize taking a beating is a normal part of long-term investing, you’ll hurt the overall performance of your portfolio.
Staying with your strategy during a pullback is difficult, and it never gets any easier."

"Long-term investment returns typically emerge as the delayed payment for adhering to a sound discipline even when it is uncomfortable to do so. Short-term investment returns are often easier to find, but they tend to be advances on a loan that will eventually be repaid with interest." -- John Hussman

"A feature of many winning investment strategies: the arbitrage involved is behavioral, not financial. Good returns derived from uncomfortable strategies do not get arbitraged away, because very few people will actually do it. In other words, if you look at your portfolio and get a warm, fuzzy feeling, you’re probably doing it wrong."

[REWahoo]

+1 to what LV_Travel said.

Thedaily, I suspect your user name gives a clue to why you aren't finding success in the market. Investing is a long-term process - think decades, not days.

[elisap]

OP, I used to have the ALOT of fear like you. I've made money and sold and lost some money. I took a breather and have been getting back in once I figured out part of it was to learn how to manage my emotions both fear and that genius feeling we get when we are doing good. I remember the day the stock market dropped 1000 points. If it had been a year or two ago I would have been sell, sell, sell but instead I remained calm and did my own thing all day. I also realized it was a buying opportunity and shortly after bought instead. I've also learned that this validity can be buying opportunities as long as I try to figure out why a stock dropped and don't end up buying on a down trend. That's not to say I still don't have fear, I suspect I always will but I've learned you don't lose unless you sell on the downside or know when it's time to sell the lemon.

I remember a saying, (not exact) but it says that if you are not feeling uncomfortable then you're not progressing.

Thanks to everyone for your post, I have a lot to learn and I'm still learning to manage and it helps to read posts from people with more experience and how they stay in control.

[jetpack]

You state you have 750k cash to invest in something safe. You say you want 20k interest. That is 2.67%

The answer is CD's. The CD's I bought this year average about 3%. Look into brokered CDs if you're not getting the rate you want locally.

[marko]

Quote:

Originally Posted by mathjak107 actually you are a very classic case when you don't have the pucker factor for equities or are overly invested. folks get burned all the time trying to buy low and sell high. typically it ends up being buy low and sell lower. this is a little secreat the public just just not know . the saying the trend is your friend is a very true one.

I'm always reminded of my dear brother who doesn't know a mutual fund from a postage stamp. Really; no clue.

About 30 years ago I suggested he throw some extra cash (less than $100K) into the Fidelity Magellan. He forgot about the money (probably still doesn't know it's there). No withdrawals, no adjustments, no reallocation.

I monitor his money for him because he's completely asleep at the wheel, but ... let's just say that he's outperformed all my amateurish efforts for improving performance.

[jkern]

Rental properties would avoid market volatility and provide 6% or greater return. If you don't like to manage property you can always hire a property management company.

[elisap]

oops, spoke too soon, I'm down but got lots to do today so I'm good.

[hnzw_rui]

Quote:

Originally Posted by LV_Travel Then you have a real problem, which is the first thing you need to address. The problem is that you are emotionally not able to handle the volatility which is an integral part of investing.

Umm, very good words of wisdom but I don't know if the OP is still following this thread. His last post was in 2014...

[REWahoo]

Quote:

Originally Posted by hnzw_rui Umm, very good words of wisdom but I don't know if the OP is still following this thread. His last post was in 2014...

I missed it!

[O2Bfree]

Great thread, in spite of the OP MIA.

Now that my fiscal farsightedness and stoicism have improved, I sometimes feel like flaunting my indifference about "losing" $xx,xxx during market downturns. But most folks would think me a fool.

And of course, the foot can really come down at any time!

[nun]

I'd suggest that the OP adjust their withdrawal goal to 3% and read the wiki over at

www.bogleheads.org

[RobLJ]

Quote:

Originally Posted by nun I'd suggest that the OP adjust their withdrawal goal to 3% and read the wiki over at www.bogleheads.org

It took me 3-4 years to get used to 5 digit daily swings in the portfolio (they started happening in 2008, but my old strategy of ignoring the portfolio until an upswing or up correction helped, psychologically, because at least I would see the day or week increase).
Now it seems more routine, just 4 digits plus an extra tacked on the end.
I will say the rapidity of the big drops and moves back up this year is interesting.

[pb4uski]

Quote:

Originally Posted by hnzw_rui Umm, very good words of wisdom but I don't know if the OP is still following this thread. His last post was in 2014...

+1 I was wondering why people were piling into a thread over 18 months old.

[braumeister]

Quote:

Originally Posted by pb4uski +1 I was wondering why people were piling into a thread over 18 months old.

I've always been impressed by how much thought people here put into their responses.

[statsman]

Quote:

Originally Posted by mpeirce So here's one idea: Become a "I'll never touch my principal" investor. Put all you money into Vanguard Wellington. It's a well managed, well respected balanced fund. It yields about 2.5% right now, so it'll generate about $25K per year for you. Swear to yourself that in up or down markets, you will not bail out. Just ignore the market, collect your dividends and construct your budget to live on that amount.

I realize this post is from 18 months ago, but this is a concept my wife and I need to embrace. We are very risk averse, having bailed completely on equities in early 2008. While it worked for us to be in bond and TIPs funds through 2012, the last three years haven't been as kind in these markets.

With retirement coming some time next year (me: 57; my wife: 63), we need to prepare our tax deferred and taxable accounts. Despite having a decent amount invested and saved, being solely in bond funds, TIPs funds, and money market is risky for the long term.

While we are/were working, we have been concentrating on our bottom line net worth. Daily/weekly/monthly fluctuations in the mutual fund prices raise havoc with this bottom line and our nerves. But if they are not sold, we still have "x" amount of shares in each fund; actually more with the re-investment of paid dividends in our tax deferred accounts.

Doing this with our taxable assets is a different story. We have a sizable amount to invest now as we head into retirement. 0.75% earned in a money market account is not going to cut it. We need to get over this hurdle now and not wait until we are retired when I think it would be even more difficult to commit.

[daylatedollarshort]

Quote:

Originally Posted by statsman I realize this post is from 18 months ago, but this is a concept my wife and I need to embrace. We are very risk averse, having bailed completely on equities in early 2008. While it worked for us to be in bond and TIPs funds through 2012, the last three years haven't been as kind in these markets. With retirement coming some time next year (me: 57; my wife: 63), we need to prepare our tax deferred and taxable accounts. Despite having a decent amount invested and saved, being solely in bond funds, TIPs funds, and money market is risky for the long term. While we are/were working, we have been concentrating on our bottom line net worth. Daily/weekly/monthly fluctuations in the mutual fund prices raise havoc with this bottom line and our nerves. But if they are not sold, we still have "x" amount of shares in each fund; actually more with the re-investment of paid dividends in our tax deferred accounts. Doing this with our taxable assets is a different story. We have a sizable amount to invest now as we head into retirement. 0.75% earned in a money market account is not going to cut it. We need to get over this hurdle now and not wait until we are retired when I think it would be even more difficult to commit.

If you are risk adverse, check out the liability matching strategy at Bogleheads wiki:

https://www.bogleheads.org/wiki/Matching_strategy

[audreyh1]

The pullback finally materialized - it only took another year and 4 months........

And it didn't pull back as far as the brief 10/2014 drop did.

[pb4uski]

Quote:

Originally Posted by daylatedollarshort If you are risk adverse, check out the liability matching strategy at Bogleheads wiki: https://www.bogleheads.org/wiki/Matching_strategy

I notice you keep mentioning matching. The Achilles heel of matching is that given that the rate of return on matching assets is low (low risk = low reward) it only really works if you are overfunded (have a really low WR... probably 2.5% or lower). It is not a viable option for most retirees.

[daylatedollarshort]

Quote:

Originally Posted by pb4uski I notice you keep mentioning matching. The Achilles heel of matching is that given that the rate of return on matching assets is low (low risk = low reward) it only really works if you are overfunded (have a really low WR... probably 2.5% or lower). It is not a viable option for most retirees.

At least some financial talking heads are advocating 2.5% or less SWR even with a mutual fund type portfolio. John Bogle interview on his return predictions over the next 10 years:

“When you factor in the costs associated with index funds, inflation, and taxes, you are actually looking at real returns of nominal to zero,” Bogle explained."

http://finance.yahoo.com/news/exclus...163124461.html

Liability matching is the approach some financial writers like Zvi Bodie and the post 2008-Bill Bernstein recommend and are discussed frequently on Bogleheads these days. Bernstein interview here:

Bernstein Says Stop When You Win The Game | The White Coat Investor - Investing And Personal Finance Information For Physicians, Dentists, Residents, Students, And Other Highly-Educated Busy Professionals

Boglehead discussion here:
https://www.bogleheads.org/forum/viewtopic.php?t=136613

If you want to rely on stocks and have the risk tolerance for it I am not trying to talk you out of it. But there are ways to retire without stocks. Not everyone is comfortable seeing 30 - 50% of their life savings at age 60+ possibly disappear in a given year, especially when they are no longer working and can't make up the money. Sequence of returns risk in retirement article here:

http://www.marketwatch.com/story/how...isk-2013-09-28

Most 65+ households actually have very little investment income in either stocks or bonds:
http://www.bls.gov/cex/2014/combined/sage.pdf