Some perspective

[ziggy29]

Originally Posted by Notmuchlonger

Im frozen with fear so I do nothing. Im like the captain going down with the ship.

Or the deer in the headlights.

[Notmuchlonger]

Originally Posted by ziggy29

Or the deer in the headlights.

Oooo or a cow bull going to slaughter!

[Leonidas]

We've had this discussion before and this was my take a couple of years ago http://www.early-retirement.org/foru...27&postcount=5

If you are a trader, you have to look at the markets, but there are a lot of followers out there and darn few leaders. If you look to the market to tell you something other than what it has already done, you're looking in the wrong place. Lot's of people are prognosticating, but nobody knows what's going to happen.

When it's all over, there will be plenty of people pulling out charts and pointing to specific events and saying "See, right here, that's where it all started!"

But how many of them saw any of these coming? List of stock market crashes - Wikipedia, the free encyclopedia

1987 smacked me pretty hard and my freaking out meter was pegged until I talked to someone who gave me good advice. After that the rest of them really didn't bother me until the dot-com thing. In fact, I guess I completely missed whatever happened in 1992 that Brewer referenced. Of course '92 was a year of 80+ hour workweeks and I don't think I even opened any of my statements until 93 or 94.

As for 2000, you could see the dot com bust coming from a long way off, and it only got me because all the tech stuff drug the rest of the market down with it. I didn't freak out, I was just disappointed with myself that I didn't recognize how it would affect my non-tech portfolio and take some profits while it was all up.

I have done some shorter term trading with a small percentage of my portfolio. But only with money that is not vital to what I need to live on in the future. If I hit it big then I get to take a nicer trip, or buy a nicer car, or whatever. If it craps out, I won't be eating dinner from the free sample trays at the grocery store. But that's more like playing with the market than investing.

If I had to make a bullet list of what I've learned from all of these fun events it would look something like this:

• The absolute minimum time horizon I should have for my investments is five years.
• Longer time horizons work much better. I prefer ten years out and farther.
• Any money I want to spend from my investments in the next five years should be in cash, today.
• The traders and the financial media have an outlook that varies from this afternoon to about 18 months out.
• Pay attention to what the traders and the financial media talk about, but don't confuse your time horizon with theirs. Therein lies a quicksand of madness.
• Good companies in good industries that make a profit, aren't burdened with a lot of debt, have a decent market share and have sane management that isn't doing stupid things are the places I want to have my long-term money.
• Watch to see where the herd is going, but don't blindly follow.
• If everyone is talking about a certain sector, and everyone is throwing money at that sector, run away as fast as possible. Unless you want to take the chance that you'll be an owner when it goes to hell - because it will tank eventually.
• Anybody who says "this is different" is wrong.
• Anybody who says "this is the way to riches without risk or effort" is wrong.
• Investing in anything that you can't explain how it makes money, in less than 5-minutes, is dumb.

[statsman]

Originally Posted by Leonidas

If I had to make a bullet list of what I've learned from all of these fun events it would look something like this:

• The absolute minimum time horizon I should have for my investments is five years.
• Longer time horizons work much better. I prefer ten years out and farther.
• Any money I want to spend from my investments in the next five years should be in cash, today.

Okay, what if you are 6 years from an early retirement? Assume that 50-60% of your income needs at the beginning of retirement will come from your investments. Also assume that if push came to shove, you could work 2-3 years more.

[ladelfina]

Worse, what if you are 5 years INTO an early retirement?
With 100% of income needs from portfolio.
Like me.*

I appreciate Leonidas' points except that I have to agree with ziggy29: this IS different because diversification is not helping as much as it traditionally has. This time I see bigger, more systemic problems than mere misallocation.

*Rhetorical question. I will probably un-retire and take up something like teaching English freelance. :P

[Marquette]

Originally Posted by ladelfina

I appreciate Leonidas' points except that I have to agree with ziggy29: this IS different because diversification is not helping as much as it traditionally has. This time I see bigger, more systemic problems than mere misallocation.

Well, if we're all going down, then that's ok too because we'll all be in the comparatively same spot. A falling tide lowers all boats. You won't need $x to retire any more because $x will go from being 'enough' to 'rich'. Now you'll just need f($x).

Or, we learn to live by growing our own food and we still get by. The only time I'll be convinced that it really is different is when the species is in danger of being wiped out. Otherwise, from a survivability standpoint, mankind will march on.

[statsman]

Originally Posted by ladelfina

I appreciate Leonidas' points except that I have to agree with ziggy29: this IS different because diversification is not helping as much as it traditionally has. This time I see bigger, more systemic problems than mere misallocation.

I'm seeing that too. I'm heavily into bonds, but bonds were flat or even down last quarter, so no help there. US stocks are down, but foreign stocks are down just as much this year. The one area that was performing decently for us, mid-cap and small-cap stocks, are now taking their lumps too.

Originally Posted by Marquette

Well, if we're all going down, then that's ok too because we'll all be in the comparatively same spot. A falling tide lowers all boats. You won't need $x to retire any more because $x will go from being 'enough' to 'rich'. Now you'll just need f($x).

Believing that would actually make investing a lot easier, at least for myself. But I tend to believe that if our portfolio is dropping, someone else's is going up (or at least not dropping nearly as much). Wrong assumption?

[ziggy29]

Originally Posted by statsman

I'm seeing that too. I'm heavily into bonds, but bonds were flat or even down last quarter, so no help there.

Even "flat" is a big help compared to the S&P 500 being down 13% YTD.

A 30% allocation to "flat" brings a 13% loss down to about a 9% loss.

[statsman]

Originally Posted by ziggy29

Even "flat" is a big help compared to the S&P 500 being down 13% YTD.

A 30% allocation to "flat" brings a 13% loss down to about a 9% loss.

For me, it appears to be one of timing. Realizing that the AAs in our 401(k)s were not properly diversified and too stock heavy for our risk tolerance, I changed the AAs on May 2. YTD to May 2 we were slightly up at +0.28%. From May 2 through July 3, we are down 5.1%.

For the first time in my adult life I am taking control of our investments and we end up losing 5% in two months. Despite understanding that the stock markets as a whole are dropping most everywhere, I question whether I am comfortable being in the stock market at all.

[Moemg]

The thing that is different this time is we are also having the real estate melt down at the same time . When the tech meltdown was happening the real estate market was going up so you still felt like you were gaining ground . This just feels like quicksand .

[statsman]

Originally Posted by Moemg

This just feels like quicksand.

That aptly describes investing for me the past two months.

[cute fuzzy bunny]

Is it too late to suggest a deer and a cow going down with the ship? You get to pick which one was the captain.

For some reason I'm totally unfazed by this. 2000-2002 scared the whiz out of me. For a while the media hype made you feel like we were going to be attacked daily by mobs of terrorists. You couldnt get anything for cash interest. There were asset classes you could still make money on but a lot of those were a little scary.

Thats why I decided to make volatility a little less of a factor in my investing approach.

The old folks in my dads retirement community are calling it the worst they've ever seen, worse than the depression. Sorry, but thats not what I'm feeling.

[ziggy29]

Originally Posted by cute fuzzy bunny

The old folks in my dads retirement community are calling it the worst they've ever seen, worse than the depression. Sorry, but thats not what I'm feeling.

That's probably because from their perspective, there is nothing more menacing to their well-being than high inflation.

[statsman]

Originally Posted by ziggy29

That's probably because from their perspective, there is nothing more menacing to their well-being than high inflation.

And simultaneous loss of net worth of assets.

[cute fuzzy bunny]

Yahbut, you'd think that people who actually lived during the depression would see the differences. We're not looking at the stock market going completely bust, mass losses of property and jobs, and an economy that is totally flat on its back and out cold.

We've got some real estate speculators and people with poor judgment that lost money on their homes. Unemployment up a little. The financial markets beaten up here and there. Some credit issues.

Basically if oil drops $40-50 a barrel, the job market picks up a little bit, the stock market stops dribbling down and the real estate market hits bottom this all looks perfectly fine.

Theres no reason why all those things wont happen in the next year or so.

But for the stricken pessimists, theres also no reason why things wont keep going down...especially if everyone thinks they will and plans accordingly.

[unclemick]

Pssst - Wellesley. Please nobody search how many times I've posted this!



Back in my account VG Target 2015 = current yield a tad north of 3%. I can continue my 15th year of ER with that.

To paraphrase that legendary guri - Yogi, Dividends are sorta like cash which is almost as good as real money.

ok ok so I butchered the quote - but you get the idea.

heh heh heh -

[Ronnieboy]

Originally Posted by cute fuzzy bunny

The old folks in my dads retirement community are calling it the worst they've ever seen, worse than the depression. Sorry, but thats not what I'm feeling.

I sure hope not. I wasn't old enough to see or even experience the depression, but from what I have heard/read, thousands of people were standing in cheese lines, not working, skipping meals, when they did eat is was tongue of shoe soup, etc. I haven't seen anything that bad, if anything - around here - the Hummers have slowed down to 10mph over the speed limit

P.S. How do I add an Avatar?

[REWahoo]

Originally Posted by Ronnieboy

I wasn't old enough to see or even experience the depression, but from what I have heard/read, thousands of people were standing in cheese lines...

And the cheese lines only served bread & soup - no cheese!

Originally Posted by Ronnieboy

P.S. How do I add an Avatar?

Click on "User CP" near the top of the page
Click on "Edit Avatar" on the left

[Notmuchlonger]

WWSOD

What would Suze Orman do? Hey she will be in Dallas Aug 15. Maybe I will go see her