Who do you trust?

[OldShooter]

... If they are so smart at managing money, why aren’t they living off the windfall instead of still earning a living? ..

This is an extremely important question that is almost never asked.

The answer is that they are stuffing themselves into business suits and commuting to work in a building where the windows don't even open because they know that they cannot make a living by investing their own money using the expertise they claim to have.

 

[Red Badger]

DW & DS. A few select sibs.

Otherwise, no one. Some days, I'm a bit suspect of me. Perhaps a work in progress?

 

[imoldernu]

With very few exceptions, the wealthiest billionaires acquired their fortunes through leverage, and for the most part received equity in their business... as board members or officers, receiving stock as part or all of their compensation.

Even with the SEC rules, using time limits and % of tradeable buys and sells, large corporations are able to manipulate stock trading profits... thus the efforts of Dodd Frank controls and the SEC rule 10B-18 to limit this leveraged buying have worked in an on-off basis.

The mechanics of influencing prices is subtle. Some corporations have paid out billions in fines, with many more cases to be determined.

This is my "take" on wealth concentration.

FWIW, another current "watchable" number is the valuation of China's Yuan... short term indicator.

More indicators for the macro-economy? Your thoughts?

 

[Rianne]

With very few exceptions, the wealthiest billionaires acquired their fortunes through leverage, and for the most part received equity in their business... as board members or officers, receiving stock as part or all of their compensation.

Even with the SEC rules, using time limits and % of tradeable buys and sells, large corporations are able to manipulate stock trading profits... thus the efforts of Dodd Frank controls and the SEC rule 10B-18 to limit this leveraged buying have worked in an on-off basis.

The mechanics of influencing prices is subtle. Some corporations have paid out billions in fines, with many more cases to be determined.

This is my "take" on wealth concentration.

FWIW, another current "watchable" number is the valuation of China's Yuan... short term indicator.

More indicators for the macro-economy? Your thoughts?

I so respect every one of your posts. But here's who I trust.

1. My budget, I watch it closely, what comes in, what goes out.

2. My investments have been neatly and efficiently tracked over the last 10 years.
We are making a comfortable 6% and I'm happy with that. The rate fluctuates over the highs and lows, but I trust the 10 year tracking. We're making over 100K/yr in FIRE. How can I complain? I guess we're turtles in this race.

3. I trust my DH who has been loyal and faithful over the years, 33 years. We can drive each other crazy at times, but what the hay, I love him.

4. I trust sleep well at night. I don't like to worry too much. So, off goes the news and in comes the best TV series watching ever! Complex and interesting plots and characters, especially on BBC.

5. I guess I trust science to an extent. Although health claims come and go, I pick the claims I like and hope they're true.

I discovered simple makes life easy. I do enjoy the posts that go into the minutia of every detail one can think of, but I don't dwell on them. ER is good reading and entertaining. Takes me out of my box.

 

[zippy2020]

That's why a balanced portfolio helps mitigate risk. It's not a 100% solution, but it increases your odds of reducing short/medium-term fluctuations.

Interestingly, studies have shown that an 80/20 stock & bond portfolio isn't far behind the gains of a 100% stock portfolio, which is held to be the highest risk. Even a 60/40 split produced gains only 2% less over 25 yrs than a 100% stock holding.

However, a couple of caveats:
- If your distributions are your sole source of income, those withdrawals will harm your portfolio in a down market, and correspondingly limit your portfolio's recovery in the inevitable upswing. Less assets = less gain, no matter what way you slice it.

- Consider that it may be more important to you to feel "in control" of your assets than to fret about losing $$$ as a downturn begins. Perhaps you might wish to pull out some of your assets to build an "emergency retirement fund"; e.g., an amount equal to your total monthly expenses, times (whatever period you think a downturn might last - 6 mo? 12 mo?).

Keep a modest percentage of that liquid (I'd do 3 mo.) and put the rest in laddered CD's going out 1-3 yrs. Interest rates are rising but they won't jump up enough that it will make any real difference on short-term instruments.

If you find yourself using up your 3 mo. (or whatever) cash, then close out the shortest-period CD. Losing a hundred dollars of interest is better than having to sell $15K of equities in a falling market. Repeat, rinse, repeat.

Sometimes trying to gain a few more extra dollars can backfire. This isn't a competition against anybody else's retirement, after all. It's your money and YOU need to feel in control of your fate. If being a little more conservative helps you sleep better at night and (most importantly) not panic when the media splashes lurid headlines about the market every day, then what's wrong with that?

Better you feel comfortable with a workable plan, than feel at the mercy of outside forces you can't control.

Good luck to you!

 

[RenoJay]

Around the turn of the century, James Glassman wrote a book titled “Dow 36,000” in which he argued the Dow would quadruple in the next three years. As we know, rather than quadrupling, it was cut in half during that time. Many unsophisticated investors absorbed Glassman’s enthusiasm, jumped into stocks at the worst time and lost their shirts. Fast forward a decade or so and Glassman is now a personal finance writer for kiplinger’s. I wrote Kiplinger’s a letter that a guy like Glassman shouldn’t get a free do-over after such a monumental screw up. They wrote me back to thank me for the opinion and that they’d share it with Glassman. (But they wouldn’t publish my letter.) had he been right, he’d be a major celebrity. But since he was wrong, his huge mistake was swept under the rug. Heads he wins, tails everyone else loses. There’s no disincentive to be a financial advisor who is very, very wrong, but there’s big upside to occasionally being right. Trust yourself.

 

[Dtail]

Even a broken clock.......

 

[bw5972]

Excuse me? When did the DOW sink to half it’s 1999 peak? I must have slept thru that.

 

[namesbond]

I'm currently 31 and opened my Roth IRA when I was 17. My approach has always been DIY index funds. I'm currently 1/3 Index funds, 1/3 home equity, and 1/3 pension for my net worth.


My thought has always been that if I ever want to have a successful retirement I need to be disciplined in contributing to index funds enjoying both when the market is low and on sale and when the market is high and increasing my net worth.


I don't view current events as having anything to do with my investing.



If the US economy truly went to fire in the streets what good will money do you anyway. Plus everyone else will be broke so who cares. If the US economy does great like it historically has now you are older and broke because you listened to the fear mongering on the news.


My thought has always been that I need to be aggressive "more stock heavy in my portfolio" while I'm young. When I get close to retirement I will get more conservative "bond, income earning focused" not based on the news or my feelings but based on where my nestegg is at and how much income can be produced to support my expected lifetime.


I honestly feel that in order to have any shot at retiring comfortably you have to be aggressive and disciplined while you are young.


If I end up broke because of the US Economy tanking oh well I tried

 

[RenoJay]

Excuse me? When did the DOW sink to half it’s 1999 peak? I must have slept thru that.

You’re right, it wasn’t technically cut in half but did go from a high of 11,722 to a low of 7,524 over a three year period that very closely aligned with Glassman’s Dow 36,000 prediction.

 

[TimeMeasure]

...curate your sources.

Key point right there. Those three words should have the stature of a maxim emblazoned on a plaque on an investor’s wall.

They entail not just assessing the credibility of a source, but the track record of that source over time, whether the message of that source is internally consistent, and also whether one grasps at a detailed, objective level the logical rationale, if any, behind the position advanced by the source.

Shifting topics - imoldernu, your post re: the increasing interest required to service the national debt is an interesting subject, thanks for raising that. Not a topic which gets much airplay in the press these days, and perhaps not even a problem, but interesting enough to be worth more reading. Not sure that it’s actionable even if it is a problem, but good for awareness - will look for some more information on this.

 

[Gunny]

I trust most everything I read at Vanguard when I Google "Vanguard economic outlook" Over the years, they have proven to have a fair and balanced approach to their forecasts.

All of their articles are presented in an orderly and fair approach. They currently have their 2018 forecast online.

Google "Vanguard economic outlook 2018"
https://personal.vanguard.com/pdf/ISGVEMO.pdf

Blackrock's quarterly market forecast last quarter had similar market returns and economic predictions going forward. I think credence to these forecasts should be given since these are two well respected fund companies which many of us trust. 100% of my portfolio are in funds managed by these two companies. Both forecasts suggest a balanced portfolio, that include non-U.S. equities, for best balanced returns. This is not new advice. I trust it and I'm going with it. Talking heads on CSNBC, FoxBusiness, Marketwatch, etc be damned.

 

[Rianne]

Blackrock's quarterly market forecast last quarter had similar market returns and economic predictions going forward. I think credence to these forecasts should be given since these are two well respected fund companies which many of us trust. 100% of my portfolio are in funds managed by these two companies. Both forecasts suggest a balanced portfolio, that include non-U.S. equities, for best balanced returns. This is not new advice. I trust it and I'm going with it. Talking heads on CSNBC, FoxBusiness, Marketwatch, etc be damned.

Talking heads are entertainment. I wonder if serious Wallstreet investors even listen to them. Some information helps, CEO interviews are interesting. If a food company has an E-Coli issue, or the recent FB selloff. The balanced approach, hopefully protects from major disasters in these cases. Slow, stable growth is attractive to me, although I still wish I'd gone big in Amazon 5 yrs. ago

 

[Chuckanut]

Remember the old saying:

"If you can't trust your banker, who can you trust?"