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-   -   What would you change? (https://www.early-retirement.org/forums/f28/what-would-you-change-39593.html)

Canadian Grunt 10-10-2008 08:11 AM

What would you change?
 
What mistakes did you make in this Bear and what will you change regarding your portfolio moving forward. To make this a little easier to understand each others position, what is your timeline to retirement? Long (10+ years), short (less than 5), in retirement.

We all make mistakes; letís admit some so we can learn from each other.

Myself, I won't be so eager to change asset mix and liquidate bonds to buy stocks after several significant drops in the market. This bear is going to be more significant than I thought. I am buying on yield and I didn't think the assets I was buying could realistically gain much more yield. Wrong!

I continue to buy all the way down because I donít know where the market bottom will be. I just know this is a buying opportunity, or I might as well leave stocks for good. It is painful to watch what I thought was a good deal 2 days ago plunge further, but I see Warren Buffet doing the same so they must know something.:p

I have 15-20 years before I need the funds.

ikubak 10-10-2008 08:16 AM

I learned that maybe I'm not as close to retirement as I thought I was. :D

Kronk 10-10-2008 08:28 AM

10+ years to go before retirement.

Things I've learned...

1. I have a high tolerance for market losses at this stage. I'm emotionally shrugging off the losses, and yesterday bought more stock and shifted some money from bonds to stocks. DW has the same outlook I do. Market losses are probably $60k+ so far.

2. Right now I'm glad I paid off my mortgage rather than putting that money into the market over the last 5 years.

3. I'm going to think/read about more dynamic asset allocation strategies for the next time the market goes haywire (up or down). Is there value to be had in more opportunistic investing rather than just investing when I have the money (dirty market timer warning)?

I'm sure I'll have more thoughts down the road...

Canadian Grunt 10-10-2008 08:33 AM

Quote:

Originally Posted by Kronk (Post 729375)
10+ years to go before retirement.

Things I've learned...

1. I have a high tolerance for market losses at this stage. I'm emotionally shrugging off the losses, and yesterday bought more stock and shifted some money from bonds to stocks. DW has the same outlook I do. Market losses are probably $60k+ so far.

2. Right now I'm glad I paid off my mortgage rather than putting that money into the market over the last 5 years.

3. I'm going to think/read about more dynamic asset allocation strategies for the next time the market goes haywire (up or down). Is there value to be had in more opportunistic investing rather than just investing when I have the money (dirty market timer warning)?

I'm sure I'll have more thoughts down the road...


I have been pondering whether it makes sense to buy only in down markets and stockpile during the recovery. I am giving this a lot of thought.

Donzo 10-10-2008 08:44 AM

Like you CG - I kept throwing in more cash and re-allocating on the ride down - way to early and therefore magnified my losses. I need to set dates for re-allocation and stick to them. This trying to buy at the bottom slapped me hard.
Of course when the market does recover those funds invested on the way down will pay off - but for now - not so great

Kronk 10-10-2008 08:45 AM

Quote:

Originally Posted by Canadian Grunt (Post 729378)
I have been pondering whether it makes sense to buy only in down markets and stockpile during the recovery. I am giving this a lot of thought.

But what metric do you use to determine the ups and downs? Or do you wait for the OMG! types of market movements like we're seeing now? I think I'll be doing some reading on this myself. With hopefully a 50-year investing lifespan remaining to me, I'm sure I'll see a few more bulls and bears.

W2R 10-10-2008 08:54 AM

I am not sure that I regret anything specific that I have done or not done.

There's just this one teeny little doubt - - I wonder if someday people will say something like this:
Quote:

Back in the 20th century, people used to gamble on "stocks" and the odds were pretty good because we were in a period of economic expansion. As we all know, economic expansion is a natural, but transient part of a country's evolution to a more stable, mature economy. Of course now, ever since the Great Bear of 2008, we realize that gambling only pays off when the odds are skewed. So, to make money we....w*rk...
One thing I REALLY want to do in ER is to take a few classes in economics, since I was never able to fit one into my engineering curriculum. Obviously I need to learn more, in order to gain more confidence in our economy if nothing else.

Notmuchlonger 10-10-2008 09:02 AM

I bought some on the down turn. If the market never goes up then yes I will have made a mistake :) Otherwise I have stuck to my plan. I am comfortable with my asset allocation.

ziggy29 10-10-2008 09:03 AM

I learned that my retirement plan went up in smoke. And I also learned that I wish I took a government job out of college. At least then I'd have an adequate chance of retiring at a decent age.

Canadian Grunt 10-10-2008 09:06 AM

Quote:

Originally Posted by Want2retire (Post 729406)
I am not sure that I regret anything specific that I have done or not done.

There's just this one teeny little doubt - - I wonder if someday people will say something like this:
One thing I REALLY want to do in ER is to take a few classes in economics, since I was never able to fit one into my engineering curriculum. Obviously I need to learn more, in order to gain more confidence in our economy if nothing else.

If there was an alternative I would agree with the statement, but how does the average Joe "save" to retire?

Memory is short, and there really is no other alternative to the stock market. Even bonds are down, and with their low yields you just can't get ahead.

I think we have to buy stocks with dividends or ETF's with a decent yield.

This could be along recovery period but I donít see an alternative to the stock market to build funds for retirement. Simply saving wonít do it.

Now if I was retiring I donít think I would be over 25% stocks. I am going to keep this years memory for that date.:)

Canadian Grunt 10-10-2008 09:14 AM

Quote:

Originally Posted by Kronk (Post 729390)
But what metric do you use to determine the ups and downs? Or do you wait for the OMG! types of market movements like we're seeing now? I think I'll be doing some reading on this myself. With hopefully a 50-year investing lifespan remaining to me, I'm sure I'll see a few more bulls and bears.

A part of me wonders that if I only bought in bear markets like 2000-2003 and now to whenever the recovery is under way. Then saved half my free cash and spent the rest during the interim. Where would I be?

I guess the metric would be to buy on a 20% decline. Needs more research, but intuitively I think I would at least come out the same with more free cash to enjoy during the interim or pay down the mortgage.

Not quite market timingÖjust buying in a bear market and not at all after the recovery.


Need more thought on thisÖbut I have a long time horizon so I figure I should get two more kicks at the cat beyond this one.

ziggy29 10-10-2008 09:19 AM

Quote:

Originally Posted by Canadian Grunt (Post 729426)
If there was an alternative I would agree with the statement, but how does the average Joe "save" to retire?

"Saving for retirement" is a fairly new thing. In the pre-WW2 days it was somthing only the idle rich could imagine. Most everyone else worked until they dropped dead or were physically unable to work.

Even after the war a lot of people could retire but didn't have to save much -- pensions were plentiful and generous, and the future of Social Security wasn't in question. Fifty years ago, many middle class people with retirement aspirations wouldn't be freaked out about a 40% market haircut because they had very little (if any) skin directly in the game. They didn't really see it affecting their retirement. Between Social Security and a pension, they were set. My FIL brings in close to $65,000 a year from SS and a pension -- and he retired at 58 with no savings.

Really only in the last 20-25 years has the average person owned stocks for retirement with the decline of the pension and the rise in IRAs and 401Ks. And generally, with no pensions and the likelihood of stingier Social, Security in the future, the only realistic chance a typical family in the middle class has is to dump a large share of their paycheck into these retirement accounts and bet fairly heavily on stocks as the only potential vehicle to provide enough growth to create a portfolio size that would fully replace an old school pension.

In the long run, the ability of the masses to "save for retirement" is pretty much an unknown.

W2R 10-10-2008 09:21 AM

Quote:

Originally Posted by Canadian Grunt (Post 729426)
If there was an alternative I would agree with the statement, but how does the average Joe "save" to retire?


I guess my statement indicates that you can't, and just have to work until death. On the other hand, I refuse to accept that so I will just have to stop thinking things like that.

Quote:

Originally Posted by Canadian Grunt (Post 729426)
This could be along recovery period but I donít see an alternative to the stock market to build funds for retirement. Simply saving wonít do it.

If I was younger and able to manage a rental and keep it in good repair, I would have one. But, I'm not. Besides, that is too much like work.

Saving could only work under certain conditions, such as if our dollars would retain the same buying power from year to year, or if savings accounts paid an interest rate equal to the rate of inflation. Unfortunately, neither is not the case.

Marquette 10-10-2008 09:22 AM

If you bought solely based on valuation, you'd have missed out on some very good runups over the last few years.

If you buy now, odds are good that you're buying closer to the bottom than, say, if you had bought a year ago. But, you still might be buying a long way from the bottom. And, when would you get out? Get out too soon and, again, you might miss a good rise.

Some timing strategies work better than others, until those don't either. I remember a few forex traders come through here. Whenever I asked them what their strategy was, it was generally 'buy the euro against the dollar'. Given the amazing margin you can play with in forex, if they didn't have the foresight to stop those sorts of trades before this last week, they're in a lot of pain right now.

The alternative might be to keep a solid asset allocation and stick to rebalancing. When coming up with that plan, include a slice just for cash. If a equities take off, your cash, as a percentage, decreases. So, you sell equities at the peak and bulk up cash. Then, when equities crash, say you never believed in AA and just stick to holding.

calmloki 10-10-2008 09:26 AM

Quote:

Originally Posted by Canadian Grunt (Post 729426)
:)

Wish i hadn't sold my '57 650 Triumph twin. :)

relearning that doing what you think is right is the best plan - not what others say is the best.

Canadian Grunt 10-10-2008 09:36 AM

Quote:

Originally Posted by Marquette (Post 729447)
If you bought solely based on valuation, you'd have missed out on some very good runups over the last few years.

If you buy now, odds are good that you're buying closer to the bottom than, say, if you had bought a year ago. But, you still might be buying a long way from the bottom. And, when would you get out? Get out too soon and, again, you might miss a good rise.

Some timing strategies work better than others, until those don't either. I remember a few forex traders come through here. Whenever I asked them what their strategy was, it was generally 'buy the euro against the dollar'. Given the amazing margin you can play with in forex, if they didn't have the foresight to stop those sorts of trades before this last week, they're in a lot of pain right now.

The alternative might be to keep a solid asset allocation and stick to rebalancing. When coming up with that plan, include a slice just for cash. If a equities take off, your cash, as a percentage, decreases. So, you sell equities at the peak and bulk up cash. Then, when equities crash, say you never believed in AA and just stick to holding.


I wasn't thinking of selling at the high point. I am a buy and hold guy. Only buying in the bear markets and letting the funds ride. Then buying on the next decline of 20% until recovery is in full swing.

I have to think about this. It doesn't seem logical to put money in the stock market on the highs. Bear markets seem easy enough to identify. It might be better to divert funds to my mortgage when the market is in recovery as I get a guaranteed return from those funds.

Marquette 10-10-2008 09:40 AM

Quote:

Originally Posted by Canadian Grunt (Post 729462)
I have to think about this. It doesn't seem logical to put money in the stock market on the highs. Bear markets seem easy enough to identify.

If you keep your head about you, I think you can identify when things are driven too high by mania (hint, when a sock puppet is starring in a superbowl spot).... But, outside of certain mania times, how would one identify when a stock market is high. Everything is easy to spot in hindsight, not so easy when you're in it.

Canadian Grunt 10-10-2008 12:17 PM

Quote:

Originally Posted by Marquette (Post 729468)
If you keep your head about you, I think you can identify when things are driven too high by mania (hint, when a sock puppet is starring in a superbowl spot).... But, outside of certain mania times, how would one identify when a stock market is high. Everything is easy to spot in hindsight, not so easy when you're in it.


If I only buy when the market is in bear territory and stop on recovery what would I lose on potential gains should I divert funds to my mortgage? The idea is to buy and hold but not continue to buy after a certain point in the recovery. Most historical gains are made early in a recovery.

In a bear market a dollar may double to the market peak, while a dollar close to the peak of a recovery stage may only go up 10-20% and be wiped out on the next bear.

Money diverted to my mortgage after this bear would keep its value no matter what happens in the market as that is cash I no longer need to service debt. Every dollar I place on my principle makes me 6.27% after taxes. Not a bad return.

I need to give this a little thought but it seems logical and a better guarantee of maintaining value.

Alan 10-10-2008 12:58 PM

Quote:

Originally Posted by Canadian Grunt (Post 729358)
What mistakes did you make in this Bear and what will you change regarding your portfolio moving forward. To make this a little easier to understand each others position, what is your timeline to retirement? Long (10+ years), short (less than 5), in retirement.

We all make mistakes; letís admit some so we can learn from each other.

It's too early to tell what mistakes if any I have made. I have been keeping my allocation at 40/50/10, haven't altered the amount of or allocations of my contributions to my 401(k) or changed the auto re-balancing that I have set up.

I plan to retire in 17 months, so the sight of of a cool $250K being knocked off the old nest egg is a little disconcerting but I am not admiting to any mistakes yet.

My decision to stay the course with financial cannons firing on all sides could of course end up a disaster like the ill-fated charge of the Light Brigade in the Crimean war at Balaclava :duh:

freebird5825 10-10-2008 05:03 PM

No changes to portfolio will be made. I started FIRE at 55/45 AA, and will leave it there. I like the "fence straddle" position very much, TY. ;D

FIREd at 48, now 50. I have at least 10 yrs before I plan to tap into portfolio. Still doing DCA but at a much lower rate than when w*rking.

Mistakes? Not having more cash flow to jump on this tremendous buying opportunity. I have cash reserves, but will not use them right now for equity purchases. Inflation is still an issue for day-to-day and seasonal (winter heating bills) costs and current income sources. Playing it safe on that til i reach a steady state.


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