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yes it was and that is my point . the same things that drag them up way above the averages drag them down way below the averages when there is even a hint of things flipping .
don't forget someone buying "o" 3 months ago because it was doing so well and thought is wasn't risky now has almost a 15% loss .
But someone that bought O a year ago or so because it looked somewhat cheap (I happened to have a cost basis in O of about $44/share) is doing just fine.
i started in 1987 with x-amount . today i have over a million in a particular portfolio . if my value plunges 30% i am down that money . just because you keep the money in play daily does not mean at anytime that value is not all your money . it just means your balance is variable and changes .
a plunge of 15% in value is just that no matter what your profit was .
think of the logic of it . if i sold "o" before it fell and bought at&t which fell about the same i lost 15% , but if i don't sell "o" and it fell `15% it does not count because i am still up . really ??????
in both cases you are down 15% from where you were regardless of what got you to that higher point . it is all your value and your money at any point .
i started in 1987 with x-amount . today i have over a million in a particularinvestment . if my value plunges 30% i am down that money . just because you keep the money in play daily does not mean at anytime that is not your money . it just means your balance is variable and changes .
a plunge of 15% in value is just that no matter what your profit was .
So your argument is...people should always know when to sell at the top and reinvest at the bottom. Do you happen to have that information? If so, I'll gladly start to do that.
the point is your value and worth is always what it is at any given point in time .
trying to say you did not experience a bad drop because you are still up is false .
that is just how we measure in the investment world .
my benchmark is a few months ago i had x-amount of dollars in my account . today i have about 40k less . that is less bad because i am still up 5% but it is not as good . what we fell buys a nice car , not that anyone sells at the exact highs but it was money that was all mine at one point and now it is not here ..
but that is how things are benchmarked . you look at where you were 12/31 and you look again next year .if you are higher great , if you are lower that does not mean you did good just because you started with less money 30 years ago and the closing value is higher .
the thing with these reits is you need to be very aware they are very interest rate sensitive . rates on bonds were only up a fraction of a point and look at the hit they took . you can see the rest of those gains vanish all to quickly if in just 3 months and a fraction of a point such carnage was done .
take it as a red flag .
Last edited by mathjak107; 11-04-2016 at 08:53 AM..
the point is your value and worth is always what it is at any given point in time .
trying to say you did not experience a bad drop because you are still up is false .
that is just how we measure in the investment world .
my benchmark is a few moths ago i had x-amount of dollars in my account . today i have about 40k less . that is less bad because i am still up 5% but it is not as good . what we fell buys a nice car , not that anyone sells at the exact highs .
but that is how things are benchmarked . you look at where you were 12/31 and you look again next year .if you are higher great , if you are lower that does not mean you did good just because you started with less money 30 years ago and the closing value is higher .
the thing with these reits is you need to be very aware they are very interest rate sensitive . rates on bonds were only up a fraction of a point and look at the hit they took . you can see the rest of those gains vanish all to quickly if in just 3 months and a fraction of a point can do such carnage
I guess that depends on your expectations. I'd love 60% returns per year, but because O is a REIT I would really only expect a total yearly CAGR of about 7-8%, I am still far above that this past year. Hell it could be flat for the next 2 years and I will still meet my expectations.
I know I have a long way to go, so while I notice the drops, it doesn't really bother me. I calculate my networth monthly, I'm down about 0.6% from September, it sucks, especially considering we put several K into our retirement accounts last month, but oh well. I expect fluctuations.
in my case a mere 7% drop in our portfolio represents 9 years of maxing out our 401k at CATCHUP .
so whether we sell or not that value represents our value .
whether one cares ,well that is another story .
was going to say, does it matter if you lose 7%?
I don't know your lifestyle, but 9 years of maxing out 401k (excluding matching), comes to around 200k. so a drop for that much money would put your portfolio in the $3 million range.
If you choose to use the 4% rule (I see no reason why not but it doesn't matter much for example). It takes your yearly returns from $120k to $110k. It's still a pretty "comfortable" living so, does the drop matter? If you have other income sources, it's a smaller difference.
basically, why worry about the drops in the market when the money you are getting out of it is "sufficient" for your lifestyle/purpose? I'd be more worried about what is happening around me due to the drop (ie layoffs in area = increased poverty = bad place to live) than the $ amount I had to live on.
I guess that's how I look at reits. I know they will take a beating when interest rates goes up. But when it does, the reit portion of my portfolio will decrease, but the other part of my portfolio will increase due to higher interest rates as well. The drop from the reits will be a drag but it wont' cause the portfolio to go into the red on its own. Sure I have negative years, but I can't blame it solely on the reits, anymore than I can say that all the good years are because of them. Could I have done better without reits? Maybe, could I have done worse? Maybe. I don't have a magic ball telling me when to sell/buy. I won't start second guessing myself though because tinkering with portfolio would cause more volatility and I have no reason to think that my next "pick" would do any better anyhow. Reits have historically been "pretty good", and I can live with that for a tilt. If I turn out wrong, well, maybe I'll end up working a few more years, I can also live with that too, since more years would only add to pension anyhow.
a drop that size always matters late in the game when your portfolio's are at max in your life . . it may not effect your living standards and quite frankly shouldn't .
but when you think about that fact that 9 years of contributions vanished it is a whole lot of dough and effort .
it is great when the reverse happens but the fact is the drops become harder to deal with the fuller your fuel tanks are to max .
that is a mental thing not a financial issue most of the time .
losing 7% early on is nothing . maybe a few months of contributions . but as you get further in to the game with more and more the changes in dollars become huge.
we have already seen 35-40k swings in one afternoon and we are pretty conservatively invested . .
But compounding works the other way too, so I see it as a give and a take. Your growth is probably 2-3x what you put in over a 20-25 year investment horizon. So sure, it's the equivalent of maxing our your 401k for a number of years, but your growth is the equivalent of maxing out your 401ks for your entire working career.
It's a classic example of loss aversion, a 15% loss brings a lot more pain than an equivalent gain brings happiness.
humans are prewired to hate losing money more than making money . our brains do not deal with it in the same fashion nor even the same parts of the brain are used.
great look in to this fact using modern brain imaging gear in jason zweigs book . .
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