When will the market crash so this secular bear market will be over? (complaint, company)

[mathjak107]

Originally Posted by Glenn Miller

2000.

nope 2000 was higher interest rates and high valuations , cd's were 5%, corporate bonds were 6-7% and the 10 year treasury was over 6% .

believe me ,we are in uncharted territory.

historically dividends represented 1/3 of the s&p's total return and dividend yields are tied to interest rates.

with dividend yields under 2% that puts total market gains only in the 6% range which is 30% below the historic long term normal average.

that throws lots of historical data out the window that modern retirement planning theory was based on . it throws a big question mark as to whether retirees can even count on the old 4% rule as a guide going forward.

research by pfau , bernstein and blanchett all seem to show 2.88% may be the new 4% as rates are low and market performance longer term may be well below average.

of course your next question should be what do we care about the past if each time plays out just different enough that the only thing that ever repeats itself is historians?

the answer is , because modern research and high speed computers has allowed researchers to crunch numbers that were very difficult to do .

famed researcher michael kitces realized a startling discovery about the past when it came to retirement withdrawal rates and markets ,inflation and interest rates.

he found in all the failure periods where folks would have run out of money before they ran out of time there was a mathamatical common denominator.

that denominator was regardless of the results and what caused the failure ALL THE TIME FRAMES HAD LESS THAN A 2% AVERAGE REAL RETURN OVER THE FIRST 15 YEARS OF A 30 YEAR RETIREMENT TIME FRAME .

so now we know that regardless of events all we need to know is if time frames have not achieved a 2% real return the first 15 years of our retirement than spending down at 4% inflation adjusting will mathamatically fail and spending cuts are needed . in case you don't realize it ,the difference between 3% and 4% withdrawal rates is a 25% pay cut. that is alot.

so far the only group in danger is that y2k retiree who has hit the 15 year mark with less than 2% real return from equities (1.77%) and returns on bonds at zero real return.

all other years are still okay but that can change as time goes on with low rates and high valuations.

[ContrarianEcon]

Originally Posted by Utopian Slums

If this was true, you would not want a crash.

"Thou protest too much."

If I had 20% cash before Black Monday http://en.wikipedia.org/wiki/Black_Monday_(1987) after black Monday I'd have about a 5% cash position. I'd want a black Monday so I could turn my cash into more long term gains. As long as you don't have to cash out before the market recovers a crash means bargains to be had.

[Glenn Miller]

Originally Posted by mathjak107

nope 2000 was higher interest rates and high valuations , cd's were 5%, corporate bonds were 6-7% and the 10 year treasury was over 6% .

believe me ,we are in uncharted territory.

historically dividends represented 1/3 of the s&p's total return and dividend yields are tied to interest rates.

with dividend yields under 2% that puts total market gains only in the 6% range which is 30% below the historic long term normal average.

that throws lots of historical data out the window that modern retirement planning theory was based on . it throws a big question mark as to whether retirees can even count on the old 4% rule as a guide going forward.

research by pfau , bernstein and blanchett all seem to show 2.88% may be the new 4% as rates are low and market performance longer term may be well below average.

of course your next question should be what do we care about the past if each time plays out just different enough that the only thing that ever repeats itself is historians?

the answer is , because modern research and high speed computers has allowed researchers to crunch numbers that were very difficult to do .

famed researcher michael kitces realized a startling discovery about the past when it came to retirement withdrawal rates and markets ,inflation and interest rates.

he found in all the failure periods where folks would have run out of money before they ran out of time there was a mathamatical common denominator.

that denominator was regardless of the results and what caused the failure ALL THE TIME FRAMES HAD LESS THAN A 2% AVERAGE REAL RETURN OVER THE FIRST 15 YEARS OF A 30 YEAR RETIREMENT TIME FRAME .

so now we know that regardless of events all we need to know is if time frames have not achieved a 2% real return the first 15 years of our retirement than spending down at 4% inflation adjusting will mathamatically fail and spending cuts are needed . in case you don't realize it ,the difference between 3% and 4% withdrawal rates is a 25% pay cut. that is alot.

so far the only group in danger is that y2k retiree who has hit the 15 year mark with less than 2% real return from equities (1.77%) and returns on bonds at zero real return.

all other years are still okay but that can change as time goes on with low rates and high valuations.

I predict actively managed funds will outperform index funds because finding inefficiencies will be more important than the meager market returns.

[mathjak107]

The more folks that index and cause the same overvalued stocks to be bought the more value will be found every where else.

[Glenn Miller]

Originally Posted by mathjak107

The more folks that index and cause the same overvalued stocks to be bought the more value will be found every where else.

So you're agreeing with me that index funds are becoming too overrated and that value stocks will be more important going forward?

[Big-Bucks]

Dollar cost averaging is simply putting off risk. At some point you have to get in. Might as well get in sooner than later. Favor bonds if you can't stomach stock risk.

index funds are becoming too overrated

Actively managed funds are still over rated and over bought. The average Joe is still learning about index funds and never got the "index fund memo". Lots of people still think they can beat the markets. And there's people in this forum who confuse "taking more risk" with "beating the market". I know someone whose company 401K is closing down and now he's moving it all to a general 401K. He's just looking over reports to pick out funds that did well in the past. I tell him that past performance gives you no advantage. Not sure he will listen. People are always going to believe that they can beat the indexes.

[mathjak107]

Originally Posted by Glenn Miller

So you're agreeing with me that index funds are becoming too overrated and that value stocks will be more important going forward?

yep indexing is far to hyped with strawman returns which few ever see once they have their own intervention integrated.

that is true of managed fund returns as well and what you will actually get is something in between in both cases making the type of investing style a moot point . .

most of us all will have different buy in points ,sell points , we add money at different times , we rebalance at different points , have different allocations and dollar cost average at different time frames.

throw in different tax planning and none of those posted returns used for comparisons mean a thing that you yourself can compare against .

most of the hype is marketing.

you can never say indexing beats managers stock picking 80% of the time unless you weed out expenses.

if you want to compare investment styles you have to pull expenses out of the equation. in fact there are index funds today sold through advisors with high fees and commissions..

while fees do matter they have zero to do with whether stock picking beats indexing but you will never see results posted that way.


indexing may beat 80% of the funds but that does not mean it beats 80% of investors since investors vote with their money.

the middle of the pack of big consistant long term winners have the lions share of investor money with many many of those funds having more than 50- 100 billion dollars.

the majority of managed funds out there are funds few even heard of , they are at the top one year and the bottom the next and they have in comparison very little investor money.

while i do like index funds i think the marketing job done by a company i won't mention by name but it rhymes with handguard did a great job over hyping results and using wording that while true is not representitive of what happens to real investors in the real world.

indexing may beat the majority of funds out there . it may not beat stock pickers since results are combined with the costs of doing busines and it does not beat most investors and their money. once all the other real world parameters are included i mentioned ones own personal returns will be verry different from those published in a vacuum.

[Burkmere]

Originally Posted by Glenn Miller

I predict actively managed funds will outperform index funds because finding inefficiencies will be more important than the meager market returns.

Well, last year 13% of all active managed funds beat the market. Similar every year generally. Good luck with that especially net the fees.

[Glenn Miller]

Originally Posted by Burkmere

Well, last year 13% of all active managed funds beat the market. Similar every year generally. Good luck with that especially net the fees.

That's cute. Well luckily for me I have my money in both. I remember one year my active managed money beat the index fund by a factor of 3(this was 2011).

[mathjak107]

2014 had nothing but the s&p 500 matter, you could be the best stock picker in the world and it wouldn't have mattered a bit.

on the other hand you could have flung a dart and hot almost any fidelity large cap fund and beat the s&p 500 the last 8 years.

Fidelity beat benchmarks by $35 billion, but does anyone care? | Reuters