Oh the Pain

[luckydude]

No, not trolling. I think Joe was eliciting some supportive posts from forum members.

After all, he's not the only one here who has shares of Tesla and ARK funds. It would be nice to hear from other shareholders.

I don't hold these shares, so do not know what to tell him other than to be careful. This is something a guy has to decide for himself.

I recall there was fella on the forum who had tens of thousands of Tesla shares. He updated the forum on his NW milestone whenever Tesla hit a new high. I definitely would be interested in hearing from him on how he is dealing with the downside. Losing tens of millions in a span of a few months must be a bit nerve wrecking.

 

[luckydude]

Buckets are for the mental side of investing. No one ever said they will improve performance, but they do improve sleep.

+1

By holding 7 years' worth of expenses in cash, I happily forgo upside gains during the bull market in exchange for restful sleep and peace of mind during the bear market.

 

[mathjak107]

Why do people panic and sell on paper loss? It means nothing.

No such thing as only a paper loss .

Whether one sells an S&P fund and rides back a total market fund or keeps the same fund in play counts just the same .

That is your net worth on any given day and it counts .

Don’t confuse not caring with not counting .

Retirement draws are based on those values whether you sell or not .

All we do is hope our investments come back , but down is down until they do and it counts

 

[luckydude]

No such thing as only a paper loss .

Whether one sells an S&P fund and rides back a total market fund or keeps the same fund in play counts just the same .

That is your net worth on any given day and it counts .

Don’t confuse not caring with not counting .

Retirement draws are based on those values whether you sell or not .

All we do is hope our investments come back , but down is down until they do and it counts

I agree.

When we tell ourselves that "it's only paper loss and it's not really a loss unless we sell, so it doesn't really count," it's just a mental game we play with ourselves to make ourselves feel better when the market goes down.

After all, when the market goes up, folks don't say, "it's only paper gain and it's not really a gain unless we sell, so it doesn't really count."

If we dismiss paper losses as nothing, we should also dismiss paper gains as nothing. We can't have it both ways---happy to count the gains as real when the market goes up (even though we haven't sold yet), but dismissing the losses when the market goes down based on the specious rationale that "because we haven't sold it yet, it's just a paper loss."

 

[mathjak107]

The only time it makes a difference is when you are no longer going to invest and sell and take the money out of the investment pool or keep it in less capable assets to ride back ..

Then there is no chance of coming back .

Otherwise our value is our value , it just varies .

Other then that it always counts whether selling or not.

To many confuse not counting with not caring

 

[bobbyr]

The I-Bonds move provided me with some peace, parking 80k there, plus having about 60k in true cash makes me not care too much on the market volatility. We live pretty frugally and this site has reinforced the wisdom of not panicking or overreacting. I just don't see needing to sell investments any time soon (which is a key item for anxiety control)

Don't need or want a new car, don't want or need any shiny new objects, just golf here and there, keep the yard looking nice and tend to our two aging, dementia affected mommas. Oh and see my friends and other family as much as possible.

Life is good.

 

[ImThinkin2019]

+1

I would add that buckets - or a workable substitute - also help one to avoid the temptation to do panicked selling in a Bear market.

This might be a good time to consider your level of income diversification. IMO, if your sources of income are sufficiently diversified, you may not need buckets.

+1

We set up an income portfolio specifically for this reason.

Since our income is secure, we don't have to depend on the equity side. In our view, it is not predicable, at least over the short term. But we need to have some money there for long term growth.

Having the assured income does help us sleep at night. This is important to us and our happiness.

 

[ERD50]

I understand the need to have some cash.

Some people call it a bucket. I call it a pile. Does it make a difference? ....

Buckets are for the mental side of investing. No one ever said they will improve performance, but they do improve sleep.

I guess what gets in my craw is, there really is no difference between a 'bucket' and a cash allocation (or bonds, in a somewhat different way). So if someone says "buckets" help them sleep at night, I might say "OK, whatever floats your boat", but it just seems like an odd thing to say to me, since cash does the same thing.

I think the main difference in "buckets" vs X% (or years) in cash is that the bucket refill process seems poorly defined and convoluted. If you choose an AA and a balance point delta, that's pretty straightforward.

-ERD50

 

[COcheesehead]

I guess what gets in my craw is, there really is no difference between a 'bucket' and a cash allocation (or bonds, in a somewhat different way). So if someone says "buckets" help them sleep at night, I might say "OK, whatever floats your boat", but it just seems like an odd thing to say to me, since cash does the same thing.

I think the main difference in "buckets" vs X% (or years) in cash is that the bucket refill process seems poorly defined and convoluted. If you choose an AA and a balance point delta, that's pretty straightforward.

-ERD50

We’re splitting hairs here with terminology and methodology. A good bucket strategy has a well defined refill point, but I won’t go into that here. The main difference between your cash pile and a cash bucket is a bucket system has a way to refill the cash pile without selling equities.

 

[timbervest]

I have a function set up in my spreadsheet that stress tests my AA giving me what would happen if we saw a 50% drop in equities and a 30% drop in bonds from the current position (so already taking into account what has happened to date) and compares that amount (with pension and SS) against my budget needs plus a little. As long as that delta is positive, I don't sweat it. I also hold about 2 years expenses in cash. Granted no one likes to see NW drop but if your goal is comfortable retirement (vs. wealth building), this works for me.

 

[COcheesehead]

I have a function set up in my spreadsheet that stress tests my AA giving me what would happen if we saw a 50% drop in equities and a 30% drop in bonds from the current position (so already taking into account what has happened to date) and compares that amount (with pension and SS) against my budget needs plus a little. As long as that delta is positive, I don't sweat it. I also hold about 2 years expenses in cash. Granted no one likes to see NW drop but if your goal is comfortable retirement (vs. wealth building), this works for me.

I do the same. I have a spreadsheet - a dashboard if you will - with all kinds of current data including some stress test indicators. I built it during the pandemic and it has been very helpful. It updates with a single entry - end of day portfolio value.

 

[NW-Bound]

Speaking of bucket strategy, I recall a financial guru who got into trouble for promoting his method, which I don't know much about. It took me a while to recall that it was Ray Lucia.

I first heard about bucket strategy when stumbling across his radio show, said to myself to check it out, but never did.

 

[mathjak107]

yes it was ray .

he made unverified claim

 

[target2019]

When picking an individual company like CSCO, a modern tech company, note that a company may go through periods of transformation. When I look at CSCO history, it could be divided like:
1) Origin and development of router + iOS (1984-1995)
2) Internet growth era (1996-2005)
3) Acquisition and slower growth (2006-present)

We got involved with the stock in 2005. To me, today it looks like a company with technology infrastructure with security focus. Trying to compare this company to the dot-com version for investment evaluation IMO just doesn't work (for me). If your portfolio has a spot for slower growth, this could fit.

 

[Car-Guy]

Some people call it a bucket. I call it a pile. Does it make a difference?

Nope. But, I still think of it as buckets, especially now that I have consolidated all of my accounts. My accounts are in three different financial institutions (buckets) that are best suited for the types of "uses". One account is for speculation trading/gambling, one is for investing, and the other is for living expenses (or everything else). On my spreadsheet(s) they are merged and along with other assets are called my NW. Works for me. But, YMMV...

 

[gooddog]

I do nothing until the vast majority of the people scream 'the end is near', then it is time to reallocate. The less attention paid to the news the better, as the news makes it to you when it gets bad enough.

 

[daylatedollarshort]

I have a function set up in my spreadsheet that stress tests my AA giving me what would happen if we saw a 50% drop in equities and a 30% drop in bonds from the current position (so already taking into account what has happened to date) and compares that amount (with pension and SS) against my budget needs plus a little. As long as that delta is positive, I don't sweat it. I also hold about 2 years expenses in cash. Granted no one likes to see NW drop but if your goal is comfortable retirement (vs. wealth building), this works for me.

I have a spreadsheet like that, too. I have inflation and real interest rates as variables. I stress tested it when we first retired with low and high inflation and 0 - 2% real interest rates but never -7% real interest rates like we have seen this year. We have a TIPS ladder that has helped, but after running the numbers I'm going to buy even more TIPS later this year.

 

[joesxm3]

I was noodling with my rough spreadsheet that has inflation rate and investment return rate. Usually I set it to provide a real rate of return of about -2%, say inflation 5% investment return 3%. That used to get me up into my early 90's, say 30 years.

Lately I have tried setting the variables to something like inflation 12% and investment return 10%. I noticed that this real rate of return of -2% is not necessarily the same as the 5%/3% -2% real rate. It seems to cut off a few years of survival.

In any case, it is striking me that if we have persistent inflation anywhere close to what we are currently having, I will have problems unless I can jack up my investment rate of return to at least the inflation rate.

I am going to look into TIPS. Right now, about 14% of my portfolio is in series I savings bonds and I have been happy to see the nice return.

 

[gumshoe]

We need a thread called "March to a Million (DOWN)" to see who among us is first to lose a million $.

You can add me to this thread if it exists! But I'm holding onto my MSFT and AMZN and the rest of the growth and value stocks in my portfolio for as long as I can. I will check back in 3 years to let you know how it went . . . whether it's this or this

I'm not too worried, though. I have enough cash, dividends, and rental income to keep me afloat in the meantime.

 

[Bunker]

Yep, no regrets in reprogramming some of the cash reserves and passive inflows toward stocks when the COVID downturn was really starting to bite. It's counter-intuitive in the moment for sure, but if you have some cash to play with, grit teeth and wade in, then forget about it. Held on to all positions during the drunken run up and now that we're taking another beating, scooped up more positions.

The kids on Wall St. will get bored with this. The next rally is just a question of when, not if. Then the sky will fall, again. Wash, rinse, repeat.

 

[target2019]

I was noodling with my rough spreadsheet that has inflation rate and investment return rate. Usually I set it to provide a real rate of return of about -2%, say inflation 5% investment return 3%. That used to get me up into my early 90's, say 30 years.

Lately I have tried setting the variables to something like inflation 12% and investment return 10%. I noticed that this real rate of return of -2% is not necessarily the same as the 5%/3% -2% real rate. It seems to cut off a few years of survival.

In any case, it is striking me that if we have persistent inflation anywhere close to what we are currently having, I will have problems unless I can jack up my investment rate of return to at least the inflation rate.

I am going to look into TIPS. Right now, about 14% of my portfolio is in series I savings bonds and I have been happy to see the nice return.

It's not good, that's for sure. Here's a visual of what you're saying (I think).

 

[joesxm3]

Yup. That makes it visual. Very scary.

 

[Time2]

I'll bet Cramer will never forget that melt-down that he had way back when (2008?)! It was CLASSIC.

I either didn't see or forget, fun to watch, knowing what's a head.

Cramer reviewing his rant four years later.

 

[jazz4cash]

Speaking of bucket strategy, I recall a financial guru who got into trouble for promoting his method, which I don't know much about. It took me a while to recall that it was Ray Lucia.

I first heard about bucket strategy when stumbling across his radio show, said to myself to check it out, but never did.

Buckets of Money
I used to listen to Ray. I even drove 150 miles to attend a show and got a free continental breakfast! Unlike the radio program, he was pushing untraded REITS at the seminars. I think the claims around those products is what got him in trouble.

Imagine my surprise at getting an email from Ray Lucia Jr about a month ago!

 

[jgman]

Can definitely relate to this thread. I just retired December 31, 2021 and it seems as if the market started tanking immediately. Eventhough I have a nice government pension that covers most of my expenses, I could not handle watching my 401k lose chunks of money day after day. So last week during the market uptick I sold some equities and increased my cash percentage. Hope to buy back in if stocks go way down.