Oh the Pain

[youbet]

+1

The mental side of investing is HUGE. If having buckets here and there allow one to stay calm and carry on, that's a tremendous benefit.

After all, the end game for all of this is to improve one's overall wellbeing.

Completely agree. I never use "buckets" as the stress of figuring out when to replenish is too much for an old guy. But I do figure out my AA moves with a purple crayon on yellow construction paper and that seems to allow me to stay calm and carry on. DW has also been trying various fragrances and incenses in the office while I'm noodling it all. Wafting the fumes from a glass of Jack Daniels under my nose really does seem to help.

 

[mathjak107]

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

They do because our brains are easily tricked

 

[COcheesehead]

They do because our brains are easily tricked

Posts like this don’t build community, they foster ill will. You had the rep at the old forum of being the know it all, please don’t start that here.

 

[W2R]

Posts like this don’t build community, they foster ill will. You had the rep at the old forum of being the know it all, please don’t start that here.

+1

 

[NW-Bound]

If your Cisco stock was bought back in the early to late 90's don't forget to consider all their stock splits too. (Yes I know a split doesn't increase the value by itself.... but) Seems every time I looked they were splitting. I once saw someone do a quick study that if you bought 100 shares of CSCO in the early 90's, how many shares you'd have before the dotcom bust. (It was like 28,000+)

EDIT Found it.

https://www.fool.com/investing/2018/03/12/cisco-stock-split-history-why-the-networking-giant.aspx

Also, an interesting tidbit of info, since Cisco gave most/all of their employees restricted stock as part of their compensation package, there were many many secretaries working there that were millionaires by the late 90's. (That's when a million was a lot of money)

The above info was interesting too.

No, I was not that fortunate or that smart to have bought Cisco early enough to enjoy that huge run up while the tech bubble was inflating.

But the story of Cisco reminds us what happened to people who bought in late. No, if you have missed the chance, don't run after it.

From the top of March 2000 to the bottom in Oct 2002, your $10K in Cisco shrank to $1261. Man, that would hurt like the dickens. I don't know where to look up Cisco historical P/E to see what it was at these two points in time.

If you had waited until the market bottomed out after the dot com bust, and bought Cisco then on Jan 2003, you would still trail the S&P now 19 years later, but not as bad.

CSCO: $10K on Jan 1, 2003 -> $51,677 on April 30, 2022
SPY: $10K on Jan 1, 2003 -> $67,674 on April 30, 2022

 

[mathjak107]

Posts like this don’t build community, they foster ill will. You had the rep at the old forum of being the know it all, please don’t start that here.

The facts are the facts , I don’t sugar coat them.

The facts are much of what is believed has proven to be myth and old wives tales and cash buckets are one of them.

Top researchers like kitces and blanchette have discussed this over and over …it has nothing to do with what I think

 

[aja8888]

The above info was interesting too.

No, I was not that fortunate or that smart to have bought Cisco early enough to enjoy that huge run up while the tech bubble was inflating.

But the story of Cisco reminds us what happened to people who bought in late. No, if you have missed the chance, don't run after it.

From the top of March 2000 to the bottom in Oct 2002, your $10K in Cisco shrank to $1261. Man, that would hurt like the dickens. I don't know where to look up Cisco historical P/E to see what it was at these two points in time.

If you had waited until the market bottomed out after the dot com bust, and bought Cisco then on Jan 2003, you would still trail the S&P now 19 years later, but not as bad.

CSCO: $10K on Jan 1, 2003 -> $51,677 on April 30, 2022
SPY: $10K on Jan 1, 2003 -> $67,674 on April 30, 2022

In recent years, Cisco changed the company's product focus to survive. That's one of the reasons they are still here.

 

[Lsbcal]

Well today might be the breaking point for me.

Last week I really cut back on layering in as it fell to increase my equity allocation. Today I am actually thinking to sell some of those purchases at a loss, assuming farther downside.

The thread with the charts shows that we could be just at the start of a much greater downswing. The all-in podcast was saying that growth tech is being deprived to the new normal and their rule of thumb for 50% growth is 8x PE.

I hate to panic and I do have 20% or 30% left to use to buy up to my target, so maybe I will just sit and weight. However I am torn between selling some with the plan to buy back lower versus buying more lower with the plan of layering out as it goes back up. But buying more would make me even more concentrated than I already am so I see it as a risk.

I usually do the opposite of what I should, so maybe I am a harbinger of a bottom.

Certainly the prevailing mood is one of exteme fear. Here is one source although it has a somewhat short history:

link: https://www.cnn.com/markets/fear-and-greed
See the Timeline toggle there to get a sense of it's recent few years history.

I don't know where this is going but historically there have been periods of counter trend months. Take a look at that chart I posted in the other thread. One might want to wait for such a move to lighten up.

 

[NW-Bound]

...
Also, an interesting tidbit of info, since Cisco gave most/all of their employees restricted stock as part of their compensation package, there were many many secretaries working there that were millionaires by the late 90's. (That's when a million was a lot of money)

Yes, there were a lot of employees of various tech companies getting rich. Some even managed to stay rich. My brother told me of this story.

He just got hired into this company (not Cisco) in early 2000. A gal there doing an IT job had shares worth a 7-figure, and her job was not at that high a level. It was hard to get her to do anything because she was not afraid of getting fired. Thankfully, she decided to quit and to cash out her shares. Smart move, because the bubble burst soon after that.

In contrary, I read about other tech stock workers who refused to sell any shares after exercising their option, preferring to hang on a little longer because 1) stocks will go up even higher, and 2) further gains may qualify for better tax treatments.

Boom, the stock crashed and became worthless. The tech workers now hold worthless stocks, yet have not paid the tax due when they exercised the option.


I just searched and found this old April 15, 2001 article:

...
Accountants and politicians from Silicon Valley to Boston say they have been inundated with horror stories about shares purchased with employee options that workers once had hoped would make them rich. Instead, employees are saddled with big tax bills on profit they never saw.

Many of these workers now owe far more in taxes than their stock is worth. Former Cisco engineer Jeffrey Chou, 32, owes $2.5 million in taxes on company stock he purchased last year that has since withered in value. Chou figures that if he were to sell everything he owns, including the three-bedroom Foster City, Calif., townhouse that he shares with his wife and 8-month-old daughter, the family still could not pay the bill.

"I've lost sleep. I can't eat. I cannot pay, and we're ruined," Chou said.

Chou used incentive stock options to buy about 100,000 Cisco shares last year, paying 5 to 10 cents for each share. At the time, Cisco stock was trading between $60 and $70 a share. The difference between the price he paid and what the shares were worth -- about $6.9 million -- is taxable to him as profit, even though he never sold the shares.

Under the AMT, the first $175,000 of Chou's taxable income is taxed at a federal 26% rate, and any amount over that is taxed at 28%. Add in state taxes, and the bill is $2.5 million.

Chou could sell his shares now, but it wouldn't solve his problem. Cisco closed Thursday at $17.98 a share, which means that his stake is worth about $1.8 million. To pay his state and federal tax bill, he needs an additional $700,000.

 

[joesxm3]

My friend worked for a tech company in Boston . he fell into the category of exercising shares before the IPO and holding them after. When the shares were $60 he had $3MM with more yet to vest. He held onto them as they dropped to $0.55 and ended up having to take a $40K loan to pay the taxes since his average vesting price was about $9 of income per share.

 

[NW-Bound]

^^^ These are the cases where "buy-and-hold" simply do not work.

Hence, I cringe when hearing people unconditionally say "don't sell, it will come back".

No, the market will come back. Individual stocks may not. Many just go bankrupt. If you are less unfortunate like with Cisco which did not go bankrupt, you can hang on for a few decades in order to break even.

 

[F.I.R.E User]

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

 

[joesxm3]

I had planned to take the advice and do nothing and actually went out to drive my father back home for most of the afternoon.

However, I ended up buying some shares, because a left over limit order triggered and I increased my position by 3%. Not necessarily an accident since I do want to nibble at TSLA since I am still a bit under my desired allocation.

 

[lawman]

^^^ These are the cases where "buy-and-hold" simply do not work.

Hence, I cringe when hearing people unconditionally say "don't sell, it will come back".

No, the market will come back. Individual stocks may not. Many just go bankrupt. If you are less unfortunate like with Cisco which did not go bankrupt, you can hang on for a few decades in order to break even.

Are you suggesting my Enron may not come back?

 

[ERD50]

I had planned to take the advice and do nothing and actually went out to drive my father back home for most of the afternoon.

However, I ended up buying some shares, because a left over limit order triggered and I increased my position by 3%. Not necessarily an accident since I do want to nibble at TSLA since I am still a bit under my desired allocation.

It is amazing to me that someone starts a (several?) thread(s) about how they can't handle the recent volatility, yet they are investing in volatile stocks.

Hmmmmm?


-ERD50

 

[Dash man]

https://youtu.be/R2qLPoGZ5NA

 

[joesxm3]

Maybe I took a bit of editorial liberty trying to make an attractive thread title.

Its not that I can't handle the volatility, but it does cause me angst to see my portfolio getting nailed by 2% or 3% day in an day out.

If you are suggesting that I am trolling, that is not the case. P!us I am buying some VTI to cut the spiciness, but that is not I interesting to talk about.

 

[youbet]

Maybe I took a bit of editorial liberty trying to make an attractive thread title.

Its not that I can't handle the volatility, but it does cause me angst to see my portfolio getting nailed by 2% or 3% day in an day out.

If you are suggesting that I am trolling, that is not the case.

Hee, hee........ No, no, you wouldn't be trolling!

 

[MarieIG]

Completely agree. I never use "buckets" as the stress of figuring out when to replenish is too much for an old guy. But I do figure out my AA moves with a purple crayon on yellow construction paper and that seems to allow me to stay calm and carry on. DW has also been trying various fragrances and incenses in the office while I'm noodling it all. Wafting the fumes from a glass of Jack Daniels under my nose really does seem to help.

Sounds good to me!

 

[Graybeard]

Well today might be the breaking point for me.

Last week I really cut back on layering in as it fell to increase my equity allocation. Today I am actually thinking to sell some of those purchases at a loss, assuming farther downside.

When I read this I thought "oh boy, we are about to bottom all we need now is someone to utter that dreaded "W" word"! It does work in reverse, no?

 

[NW-Bound]

Are you suggesting my Enron may not come back?

It will, at the same time as my Global Crossing stock.

I had some tech stocks in 2000 that went down so bad they became pennies before too long, and by the time I convinced myself they were going under there was nothing left for me to sell, and I did not bother.

In 2000, my accounts were with Schwab, and they charged $29.95 for a buy or sell. Many stocks were worth less than that for 100 shares (I buy in round lots), so why bother, unless you need to realize a loss for tax purposes? These shares of mine were in an IRA.

 

[ERD50]

Maybe I took a bit of editorial liberty trying to make an attractive thread title.

Its not that I can't handle the volatility, but it does cause me angst to see my portfolio getting nailed by 2% or 3% day in an day out.

If you are suggesting that I am trolling, that is not the case. P!us I am buying some VTI to cut the spiciness, but that is not I interesting to talk about.

No I wasn't suggesting that you were trolling, that didn't even occur to me.

I just thought it odd that someone who, using your recent terms, gets angst from seeing 2% or 3 % drops is also invested in volatile stocks.

But now that you mention the "editorial liberty trying to make an attractive thread title.", well, isn't that kind of like trolling - throwing some 'bait' out there? I don't care one way or the other on that subject. The stock choices and this reaction just struck me as being at odds with one another.

-ERD50

 

[NW-Bound]

No I wasn't suggesting that you were trolling, that didn't even occur to me.

I just thought it odd that someone who, using your recent terms, gets angst from seeing 2% or 3 % drops is also invested in volatile stocks.

But now that you mention the "editorial liberty trying to make an attractive thread title.", well, isn't that kind of like trolling - throwing some 'bait' out there? I don't care one way or the other on that subject. The stock choices and this reaction just struck me as being at odds with one another.

-ERD50

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.

 

[Chuckanut]

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

+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.

 

[NW-Bound]

I understand the need to have some cash.

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


PS. My pile of cash is not all in one place, but distributed over several accounts. I use Quicken to add them up to keep track of the total.