Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 05-09-2021, 01:58 PM   #61
Full time employment: Posting here.
 
Join Date: Dec 2016
Posts: 717
Quote:
Originally Posted by 24601NoMore View Post
Well, I wouldn't presume to make recommendations to anyone as I don't have insight into anyone else's goals, AA, expenses or financial position. That said, I do think answering the question of "should we expect lower returns going forward" can only logically be done by looking objectively at current valuations which then leads to a "probably so (at least over the next decade or so)" answer to the original question..

In terms of my own strategy (FWIW and YMMV)..I've reduced equity exposure to ~25% of total portfolio value. Of that, roughly 1/3 is in Internationals with a heavy tilt to International Value. Also increasing AsiaPac and US Value exposure where I can find much more attractive PE ratios.

I've also bought Inflation Protection assets, a Gold ETF, REITs and a very flexible PIMCO fund that is a "go anywhere" Inflation Response fund that can hold TIPS, Emerging Markets Currency, Gold, Real Estate and similar assets. (My thinking on that one is to let the PIMCO experts - all of who are far smarter than me, determine what the right mix of inflation protection assets may be as inflation increases).

In terms of Fixed Income, I've increased exposure to short duration bond funds and have considered dialing back my longer duration funds, knowing that they're going to get hammered as rates go up.

All that said, I realize others may have totally different goals and none or little of this may be of help to anyone else's unique situation, but since you asked ..it's also worth mentioning that I'm not looking to run up the score at this point, but instead to fund ER with the lowest possible amount of risk that I can take, as a big drawdown is not something I want to go through at this point. Someone who wants to leave assets to others after death, or live more extravagantly than us in ER may have different goals and a need to take significantly more risk. All comes down to what you're trying to accomplish..

ETA - an AA that's heavy on US equities (especially Large Growth) is likely going to crush what I described above..at least in the short term until things eventually "reprice". But I'm looking to minimize risk and comfortably pay the bills, not shoot for the moon in terms of total returns or capital appreciation. And in the long run, the diversification I've described should achieve exactly that although there are of course no guarantees..lastly, on the topic of "don't take more risk than you NEED", there was a great piece (which I've posted before) by Rick Ferri originally published in Forbes where he makes a strong case that the "center of gravity" for retirees or those approaching retirement is a roughly 30/70 AA, although that can be dialed up or down based on individual circumstances and need..FWIW..https://www.forbes.com/sites/rickfer...h=100e5e85dae9.

I pretty much disagree with everything you said here , but thats OK


Just to point out a couple things....


With the S and P at 4235 and the IBES consensus at 190 for this year that puts the PE at 22 not 37 as you claim. Big difference. 2022 earnings are more important and those estimates are higher as well. Markets look forward not backward. Regardless, PE's are not predictive at all and history has shown us that.



That article you posted is from 2015 where he recommends a 30% equity allocation which , in hindsight, was horrific advice. As I said in earlier post, it depends on your investment time horizon. For me, trying to predict draconian decreases of 50% in the market and change my asset allocation doesn't help me fulfill my investment goals. My sense, is it won't do much for other long term investors either.
__________________
Retired 1/6/2017 at 50 years old
Immensely grateful


“The most important quality for an investor is temperament, not intellect.”—Warren Buffett
FREE866 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 05-09-2021, 02:17 PM   #62
Thinks s/he gets paid by the post
 
Join Date: Dec 2015
Posts: 1,106
Quote:
Originally Posted by FREE866 View Post
I pretty much disagree with everything you said here , but thats OK

Just to point out a couple things....

With the S and P at 4235 and the IBES consensus at 190 for this year that puts the PE at 22 not 37 as you claim. Big difference. 2022 earnings are more important and those estimates are higher as well. Markets look forward not backward. Regardless, PE's are not predictive at all and history has shown us that.

That article you posted is from 2015 where he recommends a 30% equity allocation which , in hindsight, was horrific advice. As I said in earlier post, it depends on your investment time horizon. For me, trying to predict draconian decreases of 50% in the market and change my asset allocation doesn't help me fulfill my investment goals. My sense, is it won't do much for other long term investors either.
Like I said..depends on your goals. If you're trying to minimize risk and take only the risk NEEDED to achieve your goals, that was and continues to be fine advice. People who were around 30/70% AA sure had a lot better time last Mar-Apr than those at significantly higher equity allocations. Sure, it came back quickly THIS TIME. That's as we all know highly unusual and unlikely to repeat.

If, on the other hand, you're comfortable riding the bucking bronco up and down, and either need or WANT to, that's fine. But not everyone here is trying to run up the score as high as we can get it. Instead, there are actually those of us who want to minimize risk, meet our goals, and sleep well at night without watching heavy swings in our portfolios..if you're OK with that..great! But I personally don't ever want that kind of a swing in my portfolio again given my and DW's current ages. Because we may not have time to ever recover and get back to current portfolio levels..

And FWIW..current S&P PE is 37. IF earnings meet projections (no guarantee and we all know how accurate analyst projections tend to be, LOL), sure..FORWARD PE is lower. But CURRENT PE is 37, and that's insane. Market cap to GDP is also over 2X, which is 2X higher than "typical". There are a gazillion other indicators all of which are seen by people far smarter than I pretend to be that ultimately point to US equity being hugely overvalued - probably by at least double where we "should" be given historical averages. Yeah.."this time is different"..until it's not.
24601NoMore is offline   Reply With Quote
Old 05-09-2021, 02:51 PM   #63
Full time employment: Posting here.
 
Join Date: Dec 2016
Posts: 717
Quote:
Originally Posted by 24601NoMore View Post
Like I said..depends on your goals. If you're trying to minimize risk and take only the risk NEEDED to achieve your goals, that was and continues to be fine advice. People who were around 30/70% AA sure had a lot better time last Mar-Apr than those at significantly higher equity allocations. Sure, it came back quickly THIS TIME. That's as we all know highly unusual and unlikely to repeat.

If, on the other hand, you're comfortable riding the bucking bronco up and down, and either need or WANT to, that's fine. But not everyone here is trying to run up the score as high as we can get it. Instead, there are actually those of us who want to minimize risk, meet our goals, and sleep well at night without watching heavy swings in our portfolios..if you're OK with that..great! But I personally don't ever want that kind of a swing in my portfolio again given my and DW's current ages. Because we may not have time to ever recover and get back to current portfolio levels..

And FWIW..current S&P PE is 37. IF earnings meet projections (no guarantee and we all know how accurate analyst projections tend to be, LOL), sure..FORWARD PE is lower. But CURRENT PE is 37, and that's insane. Market cap to GDP is also over 2X, which is 2X higher than "typical". There are a gazillion other indicators all of which are seen by people far smarter than I pretend to be that ultimately point to US equity being hugely overvalued - probably by at least double where we "should" be given historical averages. Yeah.."this time is different"..until it's not.

Again, PE isn't predictive and markets look forward , not backward. And actually earnings have been blowing through estimates so that 190 number for 2021 is probably light.



I looked back at your previous posts and it seems like you've been scared of the market for years. It's probably best you have a small equity exposure as it does take a certain mindset to ride out volatility. Markets are always volatile--that's the emotional price we pay for outstanding long term returns.
__________________
Retired 1/6/2017 at 50 years old
Immensely grateful


“The most important quality for an investor is temperament, not intellect.”—Warren Buffett
FREE866 is offline   Reply With Quote
Old 05-09-2021, 03:44 PM   #64
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: NC
Posts: 18,624
Quote:
Originally Posted by 24601NoMore View Post
Like I said..depends on your goals. If you're trying to minimize risk and take only the risk NEEDED to achieve your goals, that was and continues to be fine advice. People who were around 30/70% AA sure had a lot better time last Mar-Apr than those at significantly higher equity allocations. Sure, it came back quickly THIS TIME. That's as we all know highly unusual and unlikely to repeat.
Sooner or later “it’s” come back every single time for over a 100 years - some times it is quick, some times not. Since most here are long term investors and not market timers, that’s all that we’re hoping to see again.
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 50% equity funds / 30% bonds / 20% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 05-09-2021, 05:24 PM   #65
Thinks s/he gets paid by the post
 
Join Date: Dec 2015
Posts: 1,106
Quote:
Originally Posted by Midpack View Post
Sooner or later “it’s” come back every single time for over a 100 years - some times it is quick, some times not. Since most here are long term investors and not market timers, that’s all that we’re hoping to see again.
I was more talking to the point raised by someone else up-thread about how they expect a "V-shaped" super fast recovery in asset prices should a 30-50+% "repricing" happen in the next 12-18 months. Most here realize that speedy of a recovery doesn't always happen and is in fact the exception rather than the norm..but it seems there's an increasing number of folks (like the person I was responding to) that seem to think recovery "usually"/almost always/always happens within a couple-few years, and that's obviously not the case as history has clearly shown.
24601NoMore is offline   Reply With Quote
Old 05-09-2021, 05:51 PM   #66
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: NC
Posts: 18,624
Quote:
Originally Posted by 24601NoMore View Post
I was more talking to the point raised by someone else up-thread about how they expect a "V-shaped" super fast recovery in asset prices should a 30-50+% "repricing" happen in the next 12-18 months. Most here realize that speedy of a recovery doesn't always happen and is in fact the exception rather than the norm..but it seems there's an increasing number of folks (like the person I was responding to) that seem to think recovery "usually"/almost always/always happens within a couple-few years, and that's obviously not the case as history has clearly shown.
Many have been less than a year, others deeper & longer - but long term investors of any AA have done well just being patient. Why not show actual info instead of ominous conjecture?
Attached Images
File Type: jpeg 12ECEAFE-6D6D-4EED-97C4-5CFEC63A5DDA.jpeg (812.0 KB, 59 views)
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 50% equity funds / 30% bonds / 20% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 05-09-2021, 05:56 PM   #67
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 8,709
Quote:
Originally Posted by Midpack View Post
So what’s the best course of “action” to maximize returns and avoid losses? I don’t get the need to point out hazards without thoughtful recommendations…
Not directed to me, either but my answer is this: Not all problems have solutions. Since none of us know the future, there is no way to know how to optimally deal with it. Any "recommendations" would be at best guesses, so really not worth much. Professional economists demonstrate this every time they open their mouths.

Diversify. Don't market time. Stay the course. Looking at history, these rules seem to have worked pretty well despite rarely being optimum at any given time.
__________________
Ignoramus et ignorabimus
OldShooter is offline   Reply With Quote
Old 05-09-2021, 06:17 PM   #68
Thinks s/he gets paid by the post
 
Join Date: Dec 2015
Posts: 1,106
Quote:
Originally Posted by Midpack View Post
Many have been less than a year, others deeper & longer - but long term investors of any AA have done well just being patient. Why not show actual info instead of ominous conjecture?
OK, here's the "actual info"..4 periods since 1905 of 15+ years to recovery from peak valuations (like we seem to be in now). How many of us even have 15 years left to recover if things "reprice" to the level that many experts are currently expecting?

That's kinda my point. I suspect many are not aware of numbers like this and instead look to the 2020 experience as being indicative of what can "usually" be expected in terms of recovery, and history does not support that.

24601NoMore is offline   Reply With Quote
Old 05-09-2021, 07:22 PM   #69
Moderator Emeritus
aja8888's Avatar
 
Join Date: Apr 2011
Location: The Woodlands, TX
Posts: 15,978
Quote:
Originally Posted by 24601NoMore View Post
How many of us even have 15 years left to recover if things "reprice" to the level that many experts are currently expecting?

I'll be 78 in a few months.....I surely don't have a high probability of another 15.
__________________
Everyone has a plan until they get punched in the mouth...philosopher Mike Tyson
aja8888 is offline   Reply With Quote
Old 05-09-2021, 07:33 PM   #70
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 33,389
Quote:
Originally Posted by aja8888 View Post
I'll be 78 in a few months.....I surely don't have a high probability of another 15.
Well, if one has a near horizon, then the long-term market does not matter as much.

This brings us back to the OP's question. He was not talking or asking about a swift market decline, meaning a crash. He was asking whether he was too conservative to expect a mere 5% average return going forward.

In the context of his post, I believe he meant 5% nominal return, which means perhaps only 2-2.5% real return going forward, or maybe even lower.

I am no fortune teller, but think it's better to be conservative in your outlook than not. Don't they say not to count your chicks before they hatch?

I prefer to be conservative, then get pleasantly surprised when things turn out better than expected.
__________________
"Old age is the most unexpected of all things that happen to a man" -- Leon Trotsky (1879-1940)

"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
NW-Bound is online now   Reply With Quote
Old 05-09-2021, 08:19 PM   #71
Recycles dryer sheets
oscar1's Avatar
 
Join Date: Jul 2013
Posts: 118
Quote:
Originally Posted by audreyh1 View Post
When our net worth keeps up with inflation, I feel like I've won the lottery!!!!
+1
__________________
Enjoy your life and do as many things as possible while you can! There will come a day when you don’t want to or you can’t!
oscar1 is offline   Reply With Quote
Old 05-10-2021, 05:40 AM   #72
Thinks s/he gets paid by the post
GravitySucks's Avatar
 
Join Date: Feb 2014
Location: Syracuse
Posts: 3,246
Well, as the great stand up philosopher said:
Hope For the Best, Expect the Worst"

https://youtu.be/W9FRqE7eMJQ

My most optimistic planning was 6%. My most expected looked much like Fido's RIP worst case - 2 years of loss nearing 30% and going side ways for another 5 years. My reality has been just fantastic over the last 8 years. Never thought it could be this good.

My highest expected case going forward is still 2 horrible years followed be 5 more years sideways. What do I do about it? Keep an AA of 60/40 and rebalance when the muse strikes.
__________________
“No, not rich. I am a poor man with money, which is not the same thing"
GravitySucks is online now   Reply With Quote
Old 05-10-2021, 05:46 AM   #73
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: NC
Posts: 18,624
Quote:
Originally Posted by 24601NoMore View Post
That's kinda my point. I suspect many are not aware of numbers like this and instead look to the 2020 experience as being indicative of what can "usually" be expected in terms of recovery, and history does not support that.

Some maybe, but as I said earlier, most people here are well aware of past market behavior. Many who have won the game have quit playing, e.g. hold smaller equity allocations. And all those past long recoveries are in FIRECALC, so we have a good idea how that plays out. If you’re saying this time it’s different…
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 50% equity funds / 30% bonds / 20% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 05-10-2021, 05:56 AM   #74
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
street's Avatar
 
Join Date: Nov 2016
Posts: 6,927
Quote:
Originally Posted by NW-Bound View Post
+1

That most important item #1 there, when negated, overrides all the remaining items. It did happen to some popular posters we knew.

So, we cannot worry too much about 2 to 6.


PS. I myself almost could not make it to the early SS age of 62. So now, me worry?


So, glad all turned out well for you!

I'm not sure if gains will be lower or if a long down turns will happen. I would be happy even if on a average in the next 5 years, I got 3% would be fine with me.
street is online now   Reply With Quote
Old 05-10-2021, 11:27 AM   #75
Thinks s/he gets paid by the post
 
Join Date: Jun 2017
Location: Western NC
Posts: 3,633
Quote:
Originally Posted by 24601NoMore View Post
OK, here's the "actual info"..4 periods since 1905 of 15+ years to recovery from peak valuations (like we seem to be in now). How many of us even have 15 years left to recover if things "reprice" to the level that many experts are currently expecting?

That's kinda my point. I suspect many are not aware of numbers like this and instead look to the 2020 experience as being indicative of what can "usually" be expected in terms of recovery, and history does not support that.

Aren't your numbers ignoring dividends?
ncbill is offline   Reply With Quote
Old 05-10-2021, 12:27 PM   #76
Thinks s/he gets paid by the post
 
Join Date: Dec 2015
Posts: 1,106
Quote:
Originally Posted by ncbill View Post
Aren't your numbers ignoring dividends?
I don't believe so. It's not my chart (was on SeekingAlpha) but both the chart and article say "Total" returns - ie: with dividends reinvested.
24601NoMore is offline   Reply With Quote
Old 05-10-2021, 12:43 PM   #77
Thinks s/he gets paid by the post
 
Join Date: Jun 2017
Location: Western NC
Posts: 3,633
Quote:
Originally Posted by 24601NoMore View Post
I don't believe so. It's not my chart (was on SeekingAlpha) but both the chart and article say "Total" returns - ie: with dividends reinvested.
It's more than just re-investing dividends:

https://www.nytimes.com/2009/04/26/y...ds/26stra.html

"An investor who invested a lump sum in the average stock at the market’s 1929 high would have been back to a break-even by late 1936 — less than four and a half years after the mid-1932 market low.

How can this be? Three factors have obscured this truth from investors: deflation, dividends and the distinction between the Dow Jones industrial average and the overall stock market."

https://www.livemint.com/Money/Oww1B...-fouranda.html
ncbill is offline   Reply With Quote
Old 05-10-2021, 12:56 PM   #78
Recycles dryer sheets
 
Join Date: Nov 2012
Location: Kearneysville
Posts: 206
I contemplated this thread and made a move. Found that the 401K had an inflation protection bond fund, so shifted 60% over into it. May move 100%...still pondering. I think it is better to lock in this years gains and wait and see, as the market is really acting funny as of late.
Sniggle is offline   Reply With Quote
Old 05-16-2021, 09:25 AM   #79
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
mickeyd's Avatar
 
Join Date: Apr 2004
Location: South Texas~29N/98W Just West of Woman Hollering Creek
Posts: 6,526
Quote:
Yes. This. Who knows? No one.

No amount of studying market history will yield reliable predictions for the future.
Well, the stock market will PROBABLY increase long-time (whatever that means) and short-term return (whatever that means) is PROBABLY unknowable. It's a bit of a crap shoot. That is what risk is.
__________________
Part-Owner of Texas

Outside of a dog, a book is man's best friend. Inside of a dog, it's too dark to read. Groucho Marx

In dire need of: faster horses, younger woman, older whiskey, more money.
mickeyd is offline   Reply With Quote
Old 05-16-2021, 09:33 AM   #80
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 8,709
Quote:
Originally Posted by mickeyd View Post
Well, the stock market will PROBABLY increase long-time (whatever that means) and short-term return (whatever that means) is PROBABLY unknowable. It's a bit of a crap shoot. That is what risk is.
I agree completely. I do think, though, that the OP's time horizon alost certainly falls into the "unknowable" range.
__________________
Ignoramus et ignorabimus
OldShooter 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
What can we expect in returns street FIRE and Money 23 03-30-2017 06:18 AM
Buffett: Don't expect returns over 7% over next century cardude FIRE and Money 84 03-07-2008 05:30 PM
Diversifying Doesn't Lower Risk, But It Does Lower Potential Gain justin FIRE and Money 44 11-05-2005 05:16 PM

» Quick Links

 
All times are GMT -6. The time now is 12:40 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2022, vBulletin Solutions, Inc.