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Emotional swings between fear & greed are never pretty, and the resulting inevitable investor behaviors arising from such are eschewed by the best and most-respected financial investing mavens over decades.
Financial "freedom" is only as good as the freedom to live and enjoy life and retirement without obsessive tracking and almost constant tweaking of an investment portfolio.
Lottamoxie, I agree in principle. I have made almost no adjustments since 2009. I dropped a mutual fund that did not seem to be doing well. I added some real estate and other diversification based on an advisor's recommendations. I have done some minimal rebalancing. I do think it is important to keep an eye on market and economic trends. It will eventually be time to make some more major adjustments when we eventually start to reach an end of business cycle. That is where avoiding greed enters the picture. It is best to pull back early. It last did that in 2006. I had a pile of money sitting CDs. I was starting to feel foolish until the recession hit.
Emotions such as fear are poor ways of making financial decisions. I am always amazed how some people "feel good" not having any debt. They don't even want a 2 or 3% mortgage when they can clearly make more money and avoid having cash tied up. Of course the worst example is 2008 when many otherwise intelligent individuals did the worst they could do by selling low and then staying out of the market when it recovered. We can think of at least one individual who retired in the midst of a solid, growing economy but decided to do a glide path. Now they are constantly worried about being prepared for the worst, unexpected and sudden disaster. Cash in the mattress or gold .....
I don't have a strong opinion on those who want zero debt. I remember my dad was thrilled when he paid off the 30 yr mortgage but my parents did have other debt in addition, for awhile. I am keeping my mortgage and investing the extra monies instead of paying it down faster. Having no other debt other than mortgage(s) is something I do practice and highly recommend.
The rest is pretty much not tripping over your own feet. Put monies into the market, keep putting them in regularly, utilize all retirement vehicles available to you, allocate to match your horizon & risk profile, diversify, reinvest everything, don't touch retirement monies until retirement, ignore the drops, and don't otherwise overthink it. Make changes when they need to be made but don't obsess. Practicing good investor behavior and being consistent are what's controllable.
I was happy to have a mortgage at a rate well less than my investment returns. In 5 years I am $100K ahead on a mortgage of $330K. The money I make on this mortgage could fund expensive college educations for our 2 young grandkids. In fact that is very likely to be the ultimate use unless we need it for other purposes.
After the mortgage I ended up with 2 car loans. My wife is the expert at negotiating car purchases. For our 2015 Honda she negotiated the best possible end of year price. Then we started to arrange payment and the agent was upset with the idea of a cash purchase. My wife held out for a couple hundred dollars in floor mats and a roof rack in exchange for us taking a 3% loan which we can pay off without penalty at any time. A couple of months ago I bought a heavy duty diesel pickup to replace my previous vehicle which was totaled in a traffic accident. This time we were not able to negotiate an inducement to take the loan, but we keep a big chunk of cash and the loan is at a low rate.
Finally the idea of keeping the same gold portfolio for a full business cycle is bogus. It was a poor choice last year and for the past several years.
there you go with shooting from the hip again with mis-information.
gold was a poor choice last year and the year before ? this is where you need to look before shooting from the hip .
gold was up 13% last year and 8% the year before . if you had some of your bond money in it you would have been way a head . what did your bonds pay you last year and the year before ?
if you rebalanced it the years before when it was down in 2013 ,2014 and 2015 you really made some really really nice gains when it popped . so you can see you are pretty off base with your thinking . . it behaves very differently in a strategy .
i have every bit of confidence in gold , but gold is the dollars competitor , the time to buy gold is when the dollar is strong . whether it is high inflation or something our leader does that weakens the dollar gold is always going to benefit from that move .
but regardless of what gold does the star in the recessionary cycle are long term treasuries and they typically see 20-40% gains while paying you 3% to wait .
i am not out to convince you of anything . but i think you are being very short sighted and to focused on the gain portion and not enough on the volatility side which may not matter to you if you are living off a pension but it sure does to those of us drawing a constant income off our portfolio . average gains don't mean much when spending down .
that volatility hurts a retiree spending down more than those slightly higher gains help and that is why you can end up with a lower balance .
Last edited by mathjak107; 09-02-2018 at 02:19 PM..
You are the one who said this would be a poor time to make a comparison with a 60:40 because you needed to see a full business cycle.
I am also having a real hard time understanding how you did so well with gold over the past 2 years. Two years ago gold was selling at $1350 now it is at $1200. Where's the profit in that? Instead of gaining it seems that your gold allocation did very poorly.
that is exactly what i said . winning can also be by not losing and having the right assets to actually soar in a recession like long term Treasuries do . you may give some up in the bull but make it back in the down turn .
so any comparison over less than a complete cycle is useless . over the last 2 complete cycles the balance was higher
You are the one who said this would be a poor time to make a comparison with a 60:40 because you needed to see a full business cycle.
I am also having a real hard time understanding how you did so well with gold over the past 2 years. Two years ago gold was selling at $1350 now it is at $1200. Where's the profit in that? Instead of gaining it seems that your gold allocation did very poorly.
as an example you would have rebalanced some profits out of gold around the time of brexit up over 26% that year at that point and bought bonds and equities with that dough catching that rally . when trump won and stocks were down by 1000 points gold was up 60 bucks an ounce . it it was daytime and your bands were hit you would have rebalanced taking profits in gold and rolling them in to equities , so your thinking is very narrow on the strategy .
if you were doing the permanent portfolio version your rebalance bands are when an asset is 35% of the portfolio or less than 15% . the butterfly has different rebalance bands . you rarely rebalance more than once or twice a year if things are extra volatile.
you are trying to look at year over year . assets can vary easily by 25% in a year , yet by years end settle back out . by rebalancing when the bands are hit you preserve the gains in the really big moves regardless of where it ends up by years end .
the bottom line is it has been working just fine for more than 50 years now if one is interested in capital preservation and is interested in being typically 3-6% a head of inflation and not in squeaking out every potential piece of gain . the fact it does beat 60/40 many times is just a bonus , not a goal
Last edited by mathjak107; 09-02-2018 at 04:10 PM..
Sounds great. So as I suggested we should do the comparison and see how that works out over the next year or years. As I understood it you had access to Fidelity models that could track this automatically.
yes i can . i will set it up . still use magellan and total bond ?
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