it's the crash of October 2014 all over again

[Senator]

What would a bond portfolio look like after inflation? That is a better comparison...

You will likely find it worse.

 

[mathjak107]

here you go. i found it up to 2013.

 

[Bikerdude]

What would a bond portfolio look like after inflation? That is a better comparison...

You will likely find it worse.

Just a quick check but it looks like 1.783% real for the 10 yr tbill.

http://dqydj.net/treasury-return-calculator/

 

[harley]

Actually, the OP title is exactly right. It was a small correction for a few days (the crash of October) followed by big gains and new records.

 

[samclem]

From 1/1/2000 to 12/18/2014, a $10K deposit grows to $18,014 (dividend reinvested), which is an annualized return of 4.3%. However, that is before inflation, which runs 40% cumulative in that period. The $18K becomes $12.87K after inflation, which is an annualized return of 1.8%/yr.

I guess it is subjective, but 1.8% real return during a "flat market" doesn't sound too shabby. And if we compare it to the offered alternative (clever in and out trading to beat those other slothful investors), I think we might be even more satisfied with those returns.

 

[HFWR]

Sent from my iCouch using Early Retirement Forum

 

[audreyh1]

Get ready to make the magic noise . But maybe wait until after Jan 2nd for those of us rebalancing on the first trading day of the year?

I thought today we might have a new closing all-time-high. Intraday high is 2079 something, closing high 2075.4 or thereabouts.

Please hold off any excited happy noises until after Jan 2nd.

Thank you!

The Start-of-Year Rebalancers

p.s. S&P500 trading above 2080. Update - new intra-day all time high, and new closing high of 2,082.21.

 

[BBQ-Nut]

Just wish the Int'l markets would produce some good returns.


VWO has been a red drag for years in my portfolio.


I sometimes wonder what following the 'rule of thumb' of 10% in Int'l equities gets me - its enough of a drag to make me grind my teeth with their lack luster returns , and yet if they do 'well' not enough to make much of a difference.

 

[NW-Bound]

I wonder if a lot of excited happy noises will bring down the S&P and propel the international stocks up. It's worth a shot, don't you think?

 

[38Chevy454]

Just wish the Int'l markets would produce some good returns.


VWO has been a red drag for years in my portfolio.


I sometimes wonder what following the 'rule of thumb' of 10% in Int'l equities gets me - its enough of a drag to make me grind my teeth with their lack luster returns , and yet if they do 'well' not enough to make much of a difference.

I agree with you, I have the same opinion, it creates drag without much upside potential.

 

[NW-Bound]

VWO? Sell, sell, sell...

When more people throw in the towel, that's when things start to turn around...

Sell, sell, sell...

 

[W2R]

Please hold off any excited happy noises until after Jan 2nd.

Thank you!

The Start-of-Year Rebalancers

p.s. S&P500 trading above 2080. Update - new intra-day all time high, and new closing high of 2,082.21.

Bah, humbug. Not even another all time high portfolio balance for me today. Nothing here to be excited about, folks, just move right along...

Signed,

Another Start-of-Year Rebalancer

 

[audreyh1]

Just wish the Int'l markets would produce some good returns.


VWO has been a red drag for years in my portfolio.


I sometimes wonder what following the 'rule of thumb' of 10% in Int'l equities gets me - its enough of a drag to make me grind my teeth with their lack luster returns , and yet if they do 'well' not enough to make much of a difference.

Maybe next year.

Actually - that seems likely. Just when people dump a category is when it finally outperforms.

I've had years where international blew away other categories, so I stick with it.

BTW - emerging markets (VWO) is not the same as international. I don't hold emerging markets as an asset class. That 10% rule did not mean put it only in emerging markets.

 

[audreyh1]

I wonder if a lot of excited happy noises will bring down the S&P and propel the international stocks up. It's worth a shot, don't you think?

Sure, but let's save that for next year, so that we rebalancers can buy our international when it is still down.

 

[dallas27]

35 int, 10 emerging. My biggest worry is they keep saying its going do well next year. Consensus is jinxing.


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[robnplunder]

Added some more to international mutual fund ... couldn't wait until Jan 2.

 

[NW-Bound]

Sure, but let's save that for next year, so that we rebalancers can buy our international when it is still down.

I already have enough international, and EM too. People can make happy noise anytime. Wouldn't bother me. Here...

W****

 

[EastWest Gal]

Every so often, to tamper our enthusiasm about equities, we should look at a graph like the one below that I linked in from simplestockinvesting-dot-com. Except for during the secular bull market of 1983-2000, buy-and-holders do not do that well.

For the most recent period of 2000-2013, only people who bought the dips got ahead. These buyers are either younger accumulators with fresh cash, or retirees who rebalance or hold balanced funds that rebalance for them. Buy-and-holders got nowhere.

And look how much investors lost in the period of 1967-1985, even with dividends all reinvested and a WR of 0.

You may want to look at this graph again, as the Y coordinate is not linear, but appears to be logarithmic. There isn't anything about this that is flat, except the 2000-2010 decade, which contained 2002 (after 9/11) and the 2008 meltdown with stocks bottoming out in March of 2009. Investors "lost" between 1967 and 1985 because of runaway inflation. Despite that, a dollar invested in 1950 turned into $55 in 2010, after being adjusted for inflation. This appears to me to be an argument for a buy and hold strategy, rather than against it.

 

[dallas27]

You may want to look at this graph again, as the Y coordinate is not linear, but appears to be logarithmic. There isn't anything about this that is flat, except the 2000-2010 decade, which contained 2002 (after 9/11) and the 2008 meltdown with stocks bottoming out in March of 2009. Investors "lost" between 1967 and 1985 because of runaway inflation. Despite that, a dollar invested in 1950 turned into $55 in 2010, after being adjusted for inflation. This appears to me to be an argument for a buy and hold strategy, rather than against it.

+1 (inflation adjusted +1)


Sent from my iPhone using Early Retirement Forum

 

[NW-Bound]

You may want to look at this graph again, as the Y coordinate is not linear, but appears to be logarithmic. There isn't anything about this that is flat, except the 2000-2010 decade, which contained 2002 (after 9/11) and the 2008 meltdown with stocks bottoming out in March of 2009.

When I wrote "flat", I meant periods when the S&P had the same value at the start and end of the periods.

For all the roller-coaster gyrations, investors who stoically hung on by their teeth ended up with the same money after 15 years (no withdrawal!). It's not good. Again, accumulators who bought on dips loved it, but retirees who were withdrawing would not have their portfolio even "flat".

Investors "lost" between 1967 and 1985 because of runaway inflation. Despite that, a dollar invested in 1950 turned into $55 in 2010, after being adjusted for inflation. This appears to me to be an argument for a buy and hold strategy, rather than against it.

Yes, it may be great for a retiree in 1950 to hold until 2010, a period of 60 years. And while he/she was not allowed to withdraw any.

 

[BBQ-Nut]

Sure, but let's save that for next year, so that we rebalancers can buy our international when it is still down.

I guess if you like red...it is a Xmas color...

 

[NW-Bound]

By the way, I should reiterate here that bonds did not do a whole lot better in the period of 1965-1982, being also "flat" in the sense that there was no real return after inflation. However, bonds had less roller-coaster gyrations.

Mathjack showed a plot for bonds earlier in this thread. And Lsbcal showed a table comparing bonds and stocks in another thread. And using the table, I computed that a 50/50 balanced portfolio (with annual rebalancing) did better by a hair. So, it would not matter what you do if there is high inflation. Might as well buy gold coins and line them up under the mattress.

See: http://www.early-retirement.org/forums/f28/considering-reducing-equities-75037.html

 

[mathjak107]

we all have expectations of a projected amount of growth . this year we broke new highs and we all are going to look at our balances on 12/31

i bet there is no one here that would ever think 15 years later in real return that balance would be no different.

well if you had sizeable portfolios 15 years ago that is just what happened. that balance you expected to grow just died on the vine .

new money did great but your balance up to that point sucked wind. don't forget each time we hit a new high personally that becomes our new high water mark going forward,


so while i am happy to be where we are the reality is we are not much different than where we started 15 years ago with that older balance in real return.

thanfully the real estate we held did just fabulous and our net worth tripled in 12 years, but if it was just our equity investments and bonds i would have been way behind goal.


even this year with 5 great years way above the norm most folks do not realize some where along the reversion to the mean has to happen and the growth will fall off to likely bring you back to the long term averages. i just hope we don't go below but the outlook does not look great.

high stock valuations and low interest rates can be a precurser for below average returns.

we have no historical data on that combo as it never happened before.

which brings me back to why i decided to use a rising glide path when i start retirement in 7 months.

 

[audreyh1]

Just to remind folks who worry about asset classes underperforming, etc. Each year take a look at the Callan Periodic Table of Investment Returns. It's a great example of how asset class returns vary each year, and that it does pay off to be patient. I think a lot of folks tend to drop an underperforming asset class, and then the next year it often recovers. In other words, timing asset classes is tricky, but if you hold on to them and add when they are down, you are eventually rewarded.

Emerging markets outperformed all other asset classes in 2003, 2004, 2005, 2006, 2007, 2009, and 2012.

They were the worst performing asset class in 2008, 2011, and 2013.

The PDF containing the attached table is available at https://www.callan.com/research/files/757.pdf

 

[Indiana Randy]

Hello all! First post.

It's exciting (and disappointing) to hear others talking about what I've suspected for over a decade. Year after year I receive the annual reports of mutual funds in my IRAs touting how they out-performed the market, yet year after year it seems as though my balances stay about the same.

Admittedly, I've not kept a careful eye on any investments. Now, that is going to change. I'm going to 'take charge' and with your guidance and what I learn on this site, I hope to begin to build wealth with current balances.

Thanks to many who have posted here. I've been devouring this site for the last 48 hours and look forward to making some valuable contributions...even if it's just a laugh now and then.

Merry Christmas!