Anyone else a little frustrated with things right now?

[W2R]

I'm not frustrated at all. [...] so what is there to complain about?

+1 Really, if the market was a repeat of the last two years, over and over for the rest of my life, I would be really happy.

I'm waiting for the Big Drop when the market plunges down into the abyss. That hasn't happened for 8 years or so by now. When it happens again, as it always does, I promise you I'll complain bitterly.

 

[jazz4cash]

Flat is not so bad. At 4 pct WR it'll last 25 yrs even with no dividend. There seems to be a bias towards no use of principle but I fully expect to spend down my stash over time. I don't expect it will feel too good but that's what it's there for and my heirs are on their own. That said, my CDs are still averaging 4 pct and exceed my needs for cash over the next many years.


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[cooch96]

I guess that cover 30 years on average?

Not on average. Almost always. In fact, you usually have more principal after thirty years than at the beginning with a 4% WR.

 

[NW-Bound]

That brings up the perennial unanswerable question:

Will the next 30 years be "average"?

 

[petershk]

Yes. I'm frustrated.
What am I doing?
Trying to work on my feeling of frustration and not changing the investment side .

I think the problem is my feeling of frustration because I can SEE the short term "problem" of crappy returns vs not seeing things like high returns with high inflation, long term returns I've benefitted from, etc.

 

[Gone4Good]

I expect that there will be times where I eat into principal

+1

Anyone who plans to retire and live off an investment portfolio needs to internalize this point. Down markets are part of the bargain.

One of the tricks markets play on investors and retirees especially is that they can make you feel richer than you really are. A good way to look at your equity portfolio is to shave 40% off the top and see how you feel then. If you're still comfortable with your retirement plan after that exercise a sideways market like this one probably will seem like a walk in the park.

 

[mathjak107]

valuations when you retire are generally going to be key to your next bunch of years .

this is my 2nd year in retirement and 2nd year burning principal out of the gate

the only thing that counts at the end of the day are your own numbers . down years are expected but what is not expected is to many prolonged down years starting day one of retirement .

 

[HadEnuff]

+1

Anyone who plans to retire and live off an investment portfolio needs to internalize this point. Down markets are part of the bargain.

One of the tricks markets play on investors and retirees especially is that they can make you feel richer than you really are. A good way to look at your equity portfolio is to shave 40% off the top and see how you feel then. If you're still comfortable with your retirement plan after that exercise a sideways market like this one probably will seem like a walk in the park.

Once I made the decision to retire, the market started tumbling (last June/July). I found myself doing this exact exercise- taking 40% off the top- and it was still a number I could live with. Not live as nicely, mind you, but OK...
It did make me feel a lot more comfortable.

 

[Totoro]

That brings up the perennial unanswerable question:

Will the next 30 years be "average"?

And its inevitable follow-up: "average compared to what?"

 

[petershk]

And its inevitable follow-up: "average compared to what?"

I guess they will be average on average

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[MrLoco]

I have been one who has been pleased with my income. My frustration occurred a couple years ago as I never was a big stock guy, but needed to get all my money out of CDs and IBonds. But I knew putting all my money in the common stock market wasn't the answer so I researched and found utility preferred stocks that yield me 6-7%. Investment grade and my major ones produce regulated monopoly profits that cover the preferreds by 50-70 times. Works great for me. The ironic part is I invest for income, but don't use it as my pension takes care of my lifestyle.


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Very interesting. This is what I meant when referring to "thinking outside the box." Thanks for sharing Mulligan!

 

[Danmar]

in


Interesting. Mind if I ask do you pick individual stocks looking for those companies with a history of increasing dividends or a dividend growth/appreciation mutual fund?

Individual Canadian stocks. Heavily into banks, telcos, and pipelines. Only one insignificant div cut in financial crises.

 

[MichaelB]

My divs (biggest source of cash flow) have been growing at about 7% per year. Not frustrated at all?

Individual Canadian stocks. Heavily into banks, telcos, and pipelines. Only one insignificant div cut in financial crises.

The US$ value, and equivalent purchasing power, must have declined, though.

 

[Danmar]

The US$ value, and equivalent purchasing power, must have declined, though.

Probably, but FX rates move up and down over time. Since I'm a Canadian this doesn't effect me much, other than US$ expenses for my home in Arizona.

 

[MichaelB]

Probably, but FX rates move up and down over time. Since I'm a Canadian this doesn't effect me much, other than US$ expenses for my home in Arizona.

I had the impression your lifestyle had a greater international component.

Not picking on you in particular, just looking at how a simple number such as portfolio yield can mislead. Our original ER plans were to live abroad, and the decision on how to split the portfolio between US and non-US assets was impossible to resolve (for me). As it turned out, other factors came into play so I never had to live with this. My DD is married to a Canadian, however, and his father has business and personal ties in both countries, and they sure are impacted by the very strong variations in exchange rate.

 

[eytonxav]

The 4% withdrawal rate used to account[-]s[/-] for flat and down years. You shouldn't have to do anything.

FIFY - this used to be widely held belief, but is it really going forward? Although dependent on your individual circumstances, maybe 2.5 to 3% is more like it.

 

[Danmar]

I had the impression your lifestyle had a greater international component.

Not picking on you in particular, just looking at how a simple number such as portfolio yield can mislead. Our original ER plans were to live abroad, and the decision on how to split the portfolio between US and non-US assets was impossible to resolve (for me). As it turned out, other factors came into play so I never had to live with this. My DD is married to a Canadian, however, and his father has business and personal ties in both countries, and they sure are impacted by the very strong variations in exchange rate.

Don't feel picked on at all. In my case total international expenses might represent 15-20% of our expenses. So FX rates do matter to some extent, and accordinly I started investing in Canadian stock that pays divs in US$.

 

[Gone4Good]

Our original ER plans were to live abroad, and the decision on how to split the portfolio between US and non-US assets was impossible to resolve (for me). As it turned out, other factors came into play so I never had to live with this. My DD is married to a Canadian, however, and his father has business and personal ties in both countries, and they sure are impacted by the very strong variations in exchange rate.

We spend about 10 months a year overseas and I had thought briefly about factoring this in to our asset allocation. I decided against it because we don't have a permanent residence anywhere outside the U.S. nor are we expecting to.

For expats who mostly intend to live in a single country and don't really have any plans to return to the U.S. it probably makes sense to try to hedge your currency risk. For us, the currency we're spending always changes (this year it's Pesos, Euros, Pounds, Kiwis, Aus $, Rand, Pula, and the Namibian dollar). We also expect and plan to eventually "retire" from our travels to the U.S. at some point.

 

[travelover]

FIFY - this used to be widely held belief, but is it really going forward? Although dependent on your individual circumstances, maybe 2.5 to 3% is more like it.

That is beside the point. Whatever you think your safe withdrawal is, the theory is that you just take out that much, inflation adjusted, until you die. You don't go shopping around for alternate strategies or market timing any time you get nervous.

 

[Mulligan]

Very interesting. This is what I meant when referring to "thinking outside the box." Thanks for sharing Mulligan!

If you are interested in them you should read the ongoing preferred stock thread in stock section to become more familiar if interested. Many members this past year have jumped on board and many have owned them for years and years. Preferred stocks are like a parallel but separate universe trading along side the commons. Like range from the very safe yielders to the extreme speculative. The safe utility ones are somewhat illiquid so one must be cognizant of bid/ask spreads or you can get fleeced. And some are extremely illiquid. I just bought 360 shares of a water utility that has raised its common 47 consecutive years. A bit lower yield than what I usually buy at 5.51% but $7 under par and a true monopoly company that has paid its preferred quarterly dividend promptly since 1956 issue. BUT... The 1000 shares that traded this week were the first trades since July of last year. This one is a permanent edition for me.

 

[Gone4Good]

If you are interested in them you should read the ongoing preferred stock thread in stock section to become more familiar if interested.

Yes, definitely get knowledgeable. It's a class of securities that has tons of variability between securities and plenty of trap doors. You should know what straight, cumulative, convertible, participating, callable, put/call, variable, subordinated, junior subordinated, and trust preferred securities are and what each means for your investment. Callable securities, for example, can have widely different yields depending on the level of future interest rates.

You might also want to be familiar enough with reading financial statements to know how much debt sits in the capital structure ahead of you and how much cash flow cushion there is for dividend payments.

None of this is meant as a criticism of the class. It's just a complicated security that needs to be understood in a way that equity mutual funds generally do not.

 

[eytonxav]

That is beside the point. Whatever you think your safe withdrawal is, the theory is that you just take out that much, inflation adjusted, until you die. You don't go shopping around for alternate strategies or market timing any time you get nervous.

Yes, but throwing out 4% as if its the right number can be misleading.

 

[Fedup]

Gross suggested PFF when he was on CNBC a few weeks back, maybe that's the preferred ETF for dummies. Its yield right now is 5.79%, but the ETF is down today.

 

[Mulligan]

Yes, definitely get knowledgeable. It's a class of securities that has tons of variability between securities and plenty of trap doors. You should know what straight, cumulative, convertible, participating, callable, put/call, variable, subordinated, junior subordinated, and trust preferred securities are and what each means for your investment. Callable securities, for example, can have widely different yields depending on the level of future interest rates.

You might also want to be familiar enough with reading financial statements to know how much debt sits in the capital structure ahead of you and how much cash flow cushion there is for dividend payments.

None of this is meant as a criticism of the class. It's just a complicated security that needs to be understood in a way that equity mutual funds generally do not.

Very true... I actually enjoyed researching all that. There are some preferred stock mutual funds out there also, but most are relegated to owning huge slugs of financials since they comprise 80% of the preferred universe. I do not like them. I stick mostly to basic cumulative utility preferreds whose protections are considerably stronger. Adding the monopoly layer along with buying only strongly capitalized ones is another cushion for me. Subtract the banks that I have little interest in and all the "trash" being pawned off for yield chasers, there really are only about a dozen that I track, buy and sell and I have looked the landscape over. But mostly I stay away because like you mentioned...I don't understand (and unwilling to learn) or trust their financial structure.

 

[NW-Bound]

Speaking of the frustration with the market, I often wish the market to crash hard, just to get it over with.

This time, I will go all in, I swear. Still have 27% in cash.