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Old 12-25-2018, 04:48 AM
30,206 posts, read 47,436,789 times
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Originally Posted by Curly Q. Bobalink View Post
I'm the guy who has proved your post to be true, LOL. I wasn't "gloating" that I was in all cash at the start of this, I would have been money ahead had I not gone into cash two years ago during the 2016 election - I was expecting a crash at that time no matter who got elected, and decided to "sit this one out" - big mistake.

But lacking a time machine, was looking for a bit of wisdom regarding the best way to get back into the market, where 20% of my 401k will be needed six-to-ten years from now, 40% will be used between ten and twenty years from now, and 40% will be used between 20 and 30 years from now. My 401k is currently about half of my net worth, including the house, personal property, etc.. No dependents. If I happen to live into my 90's (there's only a 15 percent chance of that), I plan to sell the house and live off it. If I have to enter a nursing home long term, I plan to go up into the mountains and get et by a bar. Being only 10% in equities in my 401k today, what is the "best" strategy to get another 40% of it into the market during a decline? Note there is a chance that this thing may turn around on a dime and run back up to 29,000, leaving many folks sorrowful that they either sold too soon, or didn't purchase when the market is "on sale". As you know, with today's drop, the S&P is currently 20% off its top. While a 50% decline is definitely possible, I don't think it's all that likely.
We stayed in the market all through our working lives--even 08/09--until we saw Trump would win...
We did the same thing--pulled the accounts we had with our FA from equities and bonds into cash--
multiple 7 figures--
Unfortunately we were jumped the gun---
And went back in after a while...so have higher price point and bigger losses than someone who stayed invested and did gain the benefit of the Trump rush...likely more cushion for their fall...

We are both 70 but come from families that have longevity---so very likely we both will see 90 or more
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Old 12-25-2018, 05:15 AM
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a few years from now you will hear the stories about how the downturn of 2018 lost their money in the stock market and it is gambling and a suckers game .

in the mean time , as ALWAYS those who just ignored the cycles and did the right thing won't even remember this happened at some point.

now is when all those who thought they had a plan for dodging the bullet and fleeing to safety because all the signs of a downturn will be there learned you can't tell the real down turn from the one that recovers in a few months . so they rode things down and bailed locking in those loses ..

those who bragged about how they were not going to give up any gains and were maximizing every penny in investing in equities learned they don't have the pucker factor for the ride and they are bailing out .

others think they are going to wait for the plunge to end and buy back in . right!!!! by the time they realize it is not a suckers rally as well as there is never a time in the markets we are not waiting for the other shoe to drop , they will likely accomplish little in a positive way as far as effecting their long term outcome . if they got it right this time i would bet every penny they would try it again , get it wrong next time and give it all back .

everyone has a plan until punched in the face ...

this is why investors as a group never seem to get the same returns their funds got just riding the cycle
no one likes riding the cycle , it sucks . . it is nerve racking and stressful ..

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Old 12-25-2018, 06:36 AM
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Of course is nerve wrecking is your retirement savings. But thankfully I still have a year and half to retirement and with that said my plan has always been keeping at least two years withdrawals in less volatile places.

It’s all about keeping in buckets and replenish them at best times.

So enjoy your holidays and life and try to unplug from the daily downs we are currently going thru
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Old 12-25-2018, 06:45 AM
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a standard 50/50 mix can support more than a decade of living using just the fixed income side . you ladder bond funds by duration the same as you would ladder cd's.

if we wanted to use a bucket system instead of annual rebalancing we could not even look at the equity side for a decade . the bucket system of withdrawal does not use a fixed allocation . the standard method of withdrawal gets reset every year . they both work about the same in use
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Old 12-25-2018, 07:04 AM
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Originally Posted by mathjak107 View Post
what you posted is mathematically and factually incorrect as that is not how dividends work . you are beholden to seeing the exact same total return in both cases .

there is never any different between selling a piece of a non div payer or portfolio assuming the same or greater return . NEVER !

dividends come from the stock price , always . they are payments voted on by a board and are payments made whether there are profits or not or whether the stock appreciates or goes down . .

there is a mandatory reduction in value in your investment by the exchanges by an equal mount and APPRECIATION HAS TO RECOVER THAT PAYOUT just the same as in a portfolio of non div payers , if you pull money out .

effectively a stock that pays a dividend out and fails to see at least the appreciation in share price that it paid goes deeper and deeper in to a loss and you will have a total return that grows worse and worse . you must see the same appreciation to avoid losses dividend or not .

the dividend payment themselves are a wash , they merely are a return of a piece of your share price that existed the night before it went ex div . . in effect they sell a piece of your share price with each payment and appreciation has to recover it .

generating your own 5% dividend from a portfolio of non div payers that went up 5% requires a 5% appreciation in share , to see a 5% total return .

getting a 5% dividend from a stock needs at least the same exact 5% in appreciation to see a 5% total return .

it is no different than what happens with mutual fund distributions and dividends .

ex: the fund or stock goes up 10% in appreciation so your 100k investment is now 110k ... it pays out a 10% dividend or distribution so you get 10k and 100k stays invested and markets compound on 100k going forward .. you have the same number of shares but the price has been lowered to reflect the payout ,

if i reinvest , i buy 10k worth of shares at the lowered price after the payout and i have my same 110k back going forward .

if my portfolio of non div payers went up 10% my 100k is worth 110k . if i sell 10k in shares i have 100k left as a balance . if i reinvest that 10k i have my 110k back again going forward .

if from the next opening the dividend paying stock soars AND doubles , and you did not reinvest the div the 100k became 200k . if you did reinvest the 110k become 220k .

if the portfolio of non div payers soar at the open and double AND I DID NOT REINVEST THE MONEY I TOOK OUT the portfolio grw to the same 200k , if i reinvested what i pulled out the portfolio has the same 220k ..

this is basic math , it has nothing to do with book value ,profits or market action . it is far simpler and is only about compounding your invested dollars and what happens to them .

in theory a dividend payer that does not see at least the same appreciation in share price as they pay out would hit zero value eventually as a share price over time

each payment is subtracted off the share price by mandatory rules and needs to be recovered by share APPRECIATION .,while you had all your shares intact . in theory a portfolio that you drew the same dollars from would have its share price the same if it saw no appreciation but eventually your shares hit zero .

so both need the same exact total return to keep paying .

there is no difference . the stock or fund has a mandatory price drop when they pay out , in contrast the portfolio gets a share drop , but no price drop when you take the money .

i have explained this over and over .


5330. Adjustment of Orders

(a) A member holding an open order from a customer or another broker-dealer shall, prior to executing or permitting the order to be executed, reduce, increase, or adjust the price and/or number of shares of such order by an amount equal to the dividend, payment, or distribution on the day that the security is quoted ex-dividend, ex-rights, ex-distribution, or ex-interest, except where a cash dividend or distribution is less than one cent ($0.01), as follows:

you can learn why here for starters


More importantly, the article through example of two stocks illustrates the risk of volitality (beta) human behavior and sequence of returns.

I would suggest that anyone relying on capital gains during the distribution phase read it and determine whether they could handle the volitality. Dividend stocks tend to be less volatile. It goes without saying that there are no absolutes. The dot.com bust when the NASDAQ went down 70% is littered with stocks that went bust and there will also be dividend stocks that reduce/cut dividend or go bust.

My portfolio includes dividend stocks and I well understand the price adjustment when dividends are paid. I elect to reinvest dividends so part of growth is increase in no of shares (through dividend reinvestment) and other part is capital appreciation. With non-paying stocks, you are strictly relying on capital appreciation.

If the price of both dividend stock and non-dividend stock goes down 25%; I will generally be ahead due to increased no. of shares (less taxes paid if held in taxable account). I have held JNJ since 2009, my no. of shares has increased dramatically through dividend reinvestment of a growing dividend. I specifically selected JNJ as it's beta is .80 -- less volatility than the market.

With respect to capital appreciation distributions vs. dividend income, on a basic level when strictly viewing the account balance x-dividend, the net is no difference. For a more complete picture, factor in volatility, timing of distributions and human behavior. THis is what the article is illustrating.

The link compares JNJ to the dow, s&p, and NASDAQ. This is stock price only. Note year 2009 (bear market). This isn't to say, dividend stocks are always the way to go but dividend stocks tend to be underrated in a strong bull market when growth stocks are outperforming which is fine for someone who has years until distributions are necessary but not so good for someone starting their distribution into a bear market.

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Old 12-25-2018, 07:06 AM
71,990 posts, read 72,020,102 times
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this is false logic about the dividends . i am not talking about volatility and it has zero to do with sequence risk since sequence risk is based on TOTAL RETURN , NOT HOW THE TOTAL RETURN IS COMPRISED . SEQUENCE RISK IS IRRELEVANT WHEN IT COMES TO WHETHER THE TOTAL RETURN IS MADE OF OF DIVIDENDS , APPRECIATION OR A COMBO .


... you are no better off . it is only about total return x dollars invested . more shares at a lower price is the same dollars markets are acting on .

i have demonstrated this over and over .. in the case of dividends and distributions from existing value , they behave no different than a stock split . they take what you had invested in dollars pre going ex div and switch pockets . they take the same dollars you had and proportion them differently if you reinvest . it is more shares x a lower starting price that equals the same dollars you would have had for markets to act on if it never went ex div.

you need to add new money and buy equity at lower prices and add to holdings increasing dollars invested beyond what you had . reinvesting merely switches the existing value around so it is configured differently but adds no more new dollars . in fact it does the opposite if you do not reinvest and leaves you with less dollars starting out being acted on .
if you have 1000 shares of a 100 dollar stock, that is 100k invested
.if it falls 10% over the quarter to 90k and then goes ex div and pays a 10% dividend you will have 81k left invested after the mandatory roll back and 9k in pocket so you have 1000 shares at 81 a share left for markets to act upon . if you reinvest the 9k back in back in at this reduced price of 81 dollars you will have 1111 shares at 81 a share .that is the same 90k you had prior to reinvesting for markets to act on as you had prior .

Last edited by mathjak107; 12-25-2018 at 07:23 AM..
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Old 12-25-2018, 07:25 AM
3,721 posts, read 3,140,060 times
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Originally Posted by Maddie104 View Post
I would suggest that anyone relying on capital gains during the distribution phase read it and determine whether they could handle the volitality. Dividend stocks tend to be less volatile. It goes without saying that there are no absolutes.
It's worth noting that concentrating on dividend paying stocks means that you must sacrifice diversification. You will by the very nature of dividend investing exclude the eventual biggest gainers.
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Old 12-25-2018, 07:48 AM
355 posts, read 260,302 times
Reputation: 1136
Originally Posted by Tominftl View Post
How much making America great again can we stand? Trump likes to take the bows for the stock market when itís successful letís see how this con man blames someone else for itís drop! Iíve never seen such a baby as president. He said he would take the blame for the shut down too. I know he is going to blame the Democrats for something. He has the mind of a child.

Do you think the stock market is falling because of something our president has said or done? If so, did you praise him when the stock market was doing well?
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Old 12-25-2018, 08:00 AM
342 posts, read 142,870 times
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Originally Posted by bbtondo View Post
Do you think the stock market is falling because of something our president has said or done? If so, did you praise him when the stock market was doing well?
Not necessary to praise, he takes care of that often and loudly. Wasn't it Roosevelt who said "Talk softly and carry a big stick."
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Old 12-25-2018, 08:12 AM
9,783 posts, read 4,597,127 times
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Originally Posted by Tall Traveler View Post
You have to be your own judge. I try to balance risk versus max return. Historically, I pulled out a large chunk out of the market right before the 2016 election because everyone said a trump election would destroy the market and I thought he was going to win even though I thought his policies would benefit the economy and market....so I listened to others and it cost me a bit. I ended up getting back in the second day after the election and rode the Trump Bump.

I also got spooked with the impending Blue Wave and pulled a chunk out in September 2018 so I have avoided a good portion of the drop.

All of the above to say, follow good principles of safety and risk management and make your own calls. Also, historically, every time I've listened to "experts", I've done worse than when I've made my own calls.

Your initial mistake in 2016 was listening to market predictions from those who were anti-Trump. Pro-Trump forces called the market boom citing his pro-business policies. Never listen to the voices of your opposition.

I also went 80% cash in September due to political turmoil. My thought was to get back in after elections if things stabilized but they got worse. Now I will see what the incoming House does. I think Trump is trying to make this govt shutdown their first order of business, and not impeachments and investigations. He is also going to test the will of the new congress.
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