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Old 01-13-2016, 03:53 PM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,929,938 times
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Quote:
Originally Posted by mathjak107 View Post
just remember , never in our 146 year history has a 50/50 mix ever lost a penny over a 10 or 20- year period .

those are pretty good odds considering those time frames include the great depression , the world wars , tthe almost collapse of the financial system in 2008 and every other event that caused our markets to tumble .

that is not to say it can't happen , but the odds are in your favor .
But what do you live on in the meantime if you're getting a lousy 2% year in equities and need more to pay the bills? Do you just keep drawing down on principal - even if you're really young?

There is a newer body of thought these days when it comes to large professional pension management. That you have to match the guaranteed returns from fixed income - whatever they happen to be today - against the plan's future liabilities. Which is why the prospects of large pension pension plans - which have been been assuming pie in the sky future returns based on past returns - look so dismal. On my part - I try to match our spending with our current fixed income returns. I try to lock in fixed income returns for longer period of time when they're high - so it's more of a "rolling" process than the "lurching" process you'd wind up in if you're just doing something like only buying 6 month CDs.

FWIW - as of today - the compounded rate of return on the SP 500 for the last 15 years has been about 1.68% - plus dividends. Less than one could got gotten on a high grade muni tax free portfolio (or on a brokered CD portfolio). With a better sleep at night factor IMO. Because you know how much money you're going to get with a fixed income portfolio - and when you're going to get it.

One of the largest predictors of future equities market performance is current PE ratios. The higher when investing - the worse the prospects. The current PE ratio is pretty high - 21. Another thing I look at is earnings - which is perhaps the primary driver of gains. YOY - they are down about 14.5% in the SP 500 (while the SP 500 price is only down 6%). Again - not a good sign.

As I have said before - I have a relatively small % of our portfolio in equities (the rest is in nice fixed income) - and I trade. Put 50% of our money in buy and hold equities at our age now - no way. Robyn
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Old 01-13-2016, 03:57 PM
 
71,584 posts, read 71,751,865 times
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the answer is you need to monitor things . mathematically to support a 4% inflation adjusted income you need to maintain a 2% real return average over the first 15 years of a 30 year retirement .

over the long term returns have been better then the 2% real returns so 96% of the time you had more then you started with even with crappy starts .

if you are 6 or 7 years in on your retirement common sense says you need to cut spending if you are behind . .
no one can predict ahead that far out and no one should panic now because we are off to a rocky start either ..

the 4% is already based on the most horrible times to date so that in itself is pretty crappy .

but you need to watch and be proactive if things are doing badly for an extended period of time and adjust , it is all you can do . .

the s&p has been crappy for someone who picked 2000 to retire in . but move to 1999 , 2001 or any other year in the last 16 years and all is just fine and that includes the 2008 retiree who didn't exhibit poor investor behavior and run . you can't blame markets if folks do the wrong thing .. they were allocated far to aggressive for their pucker factor .

things have to be monitored and adjusted for like nudging a big ship to stay on course .

someone with no leeway to cut back should not be in equity's .

Last edited by mathjak107; 01-13-2016 at 04:35 PM..
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Old 01-13-2016, 04:20 PM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,929,938 times
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Quote:
Originally Posted by FiveLoaves View Post
"We have fidelity managed mathematically via algorithms (by way of a financial advisor) to keep us from any large declines in asset value"

seeriously --
I'm curious, how did the trading smathematical algorithms react during the last August/September time frame ?? Did they trigger any move to safety ?? Did they flash a sell signal to lighten up equities at that point ??
Since FiveLoaves hasn't yet responded - I'll try to answer. "Algorithmic trading" is just a fancy name for various kinds of trading systems. Which come in different flavors. I use a "home-brewed" not very fancy trading system on a variety of ETF equity positions. And it had me out of 75% or so of those positions before the swan dive in August. Note that about 95% of our portfolio is buy and hold fixed income - no trading,

FWIW - I've been trading for over 2 decades now (since the early 90's). And the one thing I can say for sure is no trading system (I've done a lot of work on developing trading systems) - no matter how good - will outperform buy and hold in a raging bull market. And no trading system - no matter how bad - will underperform in a bad bear market.

Note that when it comes to algorithmic or system trading - some people prefer to automate their trades in advance. I am not comfortable with those placed in advance computer trades because of the kinds of things many people encountered on 8/24 (big opening downdraft when people with stops were sold out at huge losses). Robyn
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Old 01-13-2016, 05:21 PM
 
Location: Charleston, SC
1,362 posts, read 767,246 times
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Thanks for the responses to the trading questions. I asked because I'm an inveterate chart-watcher, probably a throwback to my Engineering Career. I'm also a subscriber to Dan Sullivan's Money Management group. His Chartist newsletter makes for informative reading. Their trading "algorithm" triggered a sell of about 85% of equities in mid-August, and we side-stepped the worst of the end of year churn. That's about the third time he's made the correct call.....he'll never have to prove his worth to me again.

I know that Market Timing has a bad connotation, but there will always be a place for it in my world.
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Old 01-13-2016, 10:36 PM
 
Location: San Francisco Bay Area
4,698 posts, read 2,546,087 times
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One need not only buy mutual funds at brokerage houses. One can by stocks or ETF's and other investments.

Frankly, the worst thing about owning mutual funds (and I own some) is that the nervous Neals and Nellies panic and sell and then the fund manager has to sell some positions at a loss in order to cover the refunds to the nervous folks.
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Old 01-14-2016, 02:51 AM
 
71,584 posts, read 71,751,865 times
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Quote:
Originally Posted by FiveLoaves View Post
Thanks for the responses to the trading questions. I asked because I'm an inveterate chart-watcher, probably a throwback to my Engineering Career. I'm also a subscriber to Dan Sullivan's Money Management group. His Chartist newsletter makes for informative reading. Their trading "algorithm" triggered a sell of about 85% of equities in mid-August, and we side-stepped the worst of the end of year churn. That's about the third time he's made the correct call.....he'll never have to prove his worth to me again.

I know that Market Timing has a bad connotation, but there will always be a place for it in my world.
while risk mgmt is market timing the goals and results are usually quite different .

market timing is different because you are trying to beat the markets returns by outsmarting it .

that rarely works .

risk mgmt does not try to beat the markets gains , it tries to cut volatility at the expense of giving up gains.

it usually uses .a system of moving averages to get you in and out . but i does so in a fashion that won't usually improve returns once a bull market starts . rather it attempts to capture much of the gains and smooth's out the ride .

you may very well still be very lightly in equity's or even out with a risk mgmt strategy when the bull run starts and miss some of the largest gains before the moving averages catch up . but you also may be out earlier when things fell so you don't need as much in gains .

the up shot is usually you stay a head on the way down but lag on the way up .

since historically we are up 2/3's of the time and down 1/3 just riding the cycles have produced the best returns but the wildest rides up and down .

Last edited by mathjak107; 01-14-2016 at 03:45 AM..
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Old 01-14-2016, 04:04 AM
 
29,782 posts, read 34,871,258 times
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Quote:
Originally Posted by homenj View Post
Is there any place where your money could grow faster than in Fidelity? My mom says she loses a lot of money in Fidelity. Is Vanguard or any other company better?
I think this thread has gone way over the financial savvy level of the above OP question. Have a hunch mom might be going WTF about now
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Old 01-14-2016, 04:35 AM
bUU
 
Location: Georgia
11,881 posts, read 8,661,852 times
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Quote:
Originally Posted by TuborgP View Post
I think this thread has gone way over the financial savvy level of the above OP question. Have a hunch mom might be going WTF about now
I was just talking about this in another finance-related thread on another forum: "Accessibility is one of the most critical criterion for personal finance news and one of the most often ignored."
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Old 01-14-2016, 07:39 AM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,929,938 times
Reputation: 6716
Quote:
Originally Posted by FiveLoaves View Post
Thanks for the responses to the trading questions. I asked because I'm an inveterate chart-watcher, probably a throwback to my Engineering Career. I'm also a subscriber to Dan Sullivan's Money Management group. His Chartist newsletter makes for informative reading. Their trading "algorithm" triggered a sell of about 85% of equities in mid-August, and we side-stepped the worst of the end of year churn. That's about the third time he's made the correct call.....he'll never have to prove his worth to me again.

I know that Market Timing has a bad connotation, but there will always be a place for it in my world.
Dan Sullivan - that is a name from the past. He has been around for a loooooooong time . Market timing was in vogue during the 70's. But fell out of favor during the raging bull markets of the 80's and 90's. I used to do some stuff by hand. But got much more involved in charts and systems with the advent of the personal computer and the development of (sophisticated) charting/trading software. Have pretty much been doing it in earnest since the 1990's. I use my charts not only to trigger buy/sell signals - but to monitor what's going on in various areas so I can develop a coherent overview of the financial world. Reading my charts is like reading the morning papers - I do it every day.

Do you know what trading system you're following? What the rules are? I am not a big fan of "black box" systems. I like to understand why I'm doing/not doing certain things. Note that Dan Sullivan is basically a trend follower (which is pretty much what I do). Robyn
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Old 01-14-2016, 07:41 AM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,929,938 times
Reputation: 6716
Quote:
Originally Posted by TuborgP View Post
I think this thread has gone way over the financial savvy level of the above OP question. Have a hunch mom might be going WTF about now
Well - it would be nice if the OP came back and answered some of our questions so we could give him/her some suggestions specific to his mother's situation. But he/she hasn't to date. Robyn
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