My 401k YTD performanceshows 3.4%? (FDIC, wholesale, budget, company)
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When you think about it, all investing and saving is a matter of faith. Faith that the economy will continue to grow (stocks), that inflation won't skyrocket (bonds and CDs), that the currency won't become massively devalued (cash). And faith that there WILL be a future at all, and that a supervocano eruption or an asteroid strike or the sun going nova won't occur.
As for retirement, retirees must steer between two dangers: market risk (the major enemy of stocks), and inflationary risk (the major risk of bonds and CDs). Either can insure you'll end up with less money than you need to make it to the end of your life financially secure.
But again, how do you KNOW the money is going to grow faster and larger in the Vanguard S&P Fund? That's what I keep trying to find out from you guys. Do you really think I want to settle for just my 3% per year return if I can get 7% per year? Of course I want 7% per year, but damn it, am I going to get that or after the roller coaster ride for 33 years (the amount of time I have until 65), will it only average 4%? If it only averages 4%, when I take the fees out give or take, I might as well just stayed in my damn 3% Brokered CD/Conservative Bonds then. Or, will it average 2% per year and I have to HOLD it for another 10 years (which would be a total holding pattern of 43 years) before the returns kick in?
I don't know. You want absolutes. They don't exist no matter what you do. But it's about the odds. Over long periods of time, the odds have been in favor of stocks. Over long periods of time, gold appreciates by about 1% over the inflation rate but is very volatile. Over long periods of time, cash in CDs or short term treasury bonds matches the inflation rate or beats it by 1%....We don't know if any of these things will hold true in the future with absolute certainty. For all we know there could be a Great Depression 2 tomorrow. But you can play the odds and put them in your favor. That means keeping a significant portion of your portfolio in stocks (at least 40% and even that is on the low end). Sure, it's ok to hedge your bets to a degree for the "sleep at night" factor. You certainly want some bonds and some cash. If you have your own business that generates an income, that's great, too. If you own some rental real estate and don't mind being a landlord, then great. But there are no guarantees for any of this stuff.
Very true. I just read a very interesting comparison of portfolio mixes and the effect of focusing too much on "low-risk" assets and being overly concerned about sequence of returns. The author compared three different portfolio mixes starting in crash years 2000 and 2008 and withdrawing 4% annually. Even people unfortunate enough to be beginning retirement in either of those crash years fared better in an all-stock mix and even the 2008 retirees have almost recovered their entire beginning balance even after six years of withdrawals. You can read the whole thing here. http://www.servowealth.com/sites/all...tirement_0.pdf
From that article:
Finally, the most significant financial risk in retirement is not the one most people understand or acknowledge. Low-risk asset classes like high-quality bonds or portfolios that place an extreme emphasis on low-risk asset classes (such as asset allocation formulas like “age in bonds”) expose retirees to significant long-term, purchasing power risk. They have low volatility, but even lower-relative returns compared to stocks and stock-based allocations. Low returns for a long enough period of time can result in the most significant retirement risk of all—a lifetime return that is greatly exceeded by an investor’s income requirements, especially after accounting for the risk of higher-than expected inflation or spending needs.
That study was done by michael kitces , one of the most respected researchers in the industry.
I would like 10% annual returns with no risk but that's not a reality.
In the mid 80s money markets were paying 7%+ but mortgage rates were 11-12%
I remember my parents being thrilled to be able to refinance from a 12% 30yr mortgage down to a 7% 15yr note and actually have a lower monthly payment when it was all said and done. I was just a kid, but my mom still talks about how tough it was to be a homebuyer in the late 70's/early 80's...
Now if only we get those kind of money market rates again, my mortgage is locked in already!
I don't know. You want absolutes. They don't exist no matter what you do. But it's about the odds. Over long periods of time, the odds have been in favor of stocks. Over long periods of time, gold appreciates by about 1% over the inflation rate but is very volatile. Over long periods of time, cash in CDs or short term treasury bonds matches the inflation rate or beats it by 1%....We don't know if any of these things will hold true in the future with absolute certainty. For all we know there could be a Great Depression 2 tomorrow. But you can play the odds and put them in your favor. That means keeping a significant portion of your portfolio in stocks (at least 40% and even that is on the low end). Sure, it's ok to hedge your bets to a degree for the "sleep at night" factor. You certainly want some bonds and some cash. If you have your own business that generates an income, that's great, too. If you own some rental real estate and don't mind being a landlord, then great. But there are no guarantees for any of this stuff.
Listen, all I want to know is what do you guys base your confidence on, that the Stock Market is going to give you double the returns of a CD for example, OTHER than previous performance reports? Are you JUST going based on past performance, or can you give me something that shows how the next 10 - 30 years duration of the Stock Market will play out?
That's what I want to know. I talk to Financial Advisers and ask them this, and they give me a Deer in the Headlights look. I've been on this Forum asking MathJak, Low E, ncole 1, and the rest of their gang this same question, once again, NO ANSWER.
You guys keep saying that if you aren't investing in the Stock Funds you are missing out, I want you to elaborate on going forward for the next 30 YEARS (until 2045) what the Stock Market is likely to do. Is it going up, and if so, why? What is going to happen in the next 30 years that will keep the increases coming, or do I just SLAP my money in the Stock Market because the last 30 years averaged XYZ so that some how means the next 30 years will magically average that as well?
Are you JUST going based on past performance, or can you give me something that shows how the next 10 - 30 years duration of the Stock Market will play out?
Can you show how ANY investment is going to play out over the next 10-30 years? If you can, you must be the Carnac the Magnificent.
Why are you setting a condition for stock market investments that no investment whatsoever can possibly meet?
Can you show how ANY investment is going to play out over the next 10-30 years? If you can, you must be the Carnac the Magnificent.
Why are you setting a condition for stock market investments that no investment whatsoever can possibly meet?
Quote:
Originally Posted by Lowexpectations
I've asked him the same and he can't answer your question, he talks about others avoidance but is doing it himself
No, I don't duck questions. Let me answer you guys straight up. Aredhel, hell no I can't tell you what ANY investment is going to do over 10 years, with any level of reasonable planning, a business owner that's been running his business for a long time can really only give you a MAX of a 3 year plan if that much. He might say what his ultimate long term vision is, but in terms of actual detailed operational planning, 3 years is the MAX on that (if that much).
So I'm answering you directly, hell no I can't give you a 10 - 30 year projection on any investment. I can't give you a projection over 3 years. Now there's some investments, like a college degree, that you can reasonably say is going to give you long term returns. But in terms of investments like a business, a rental property, etc., hell no I can't provide that.
So now, the reason I asked you guys to provide this 10 - 30 year projection, is because it's YOU GUYS that keep telling me that I buy the Vanguard S&P Fund and leave it in there for 15 - 30 years, and over that period of time I will have higher returns than any other passive investment like CDs, Bonds, etc.
So you guys keep talking about this 10 - 30 year period and you keep saying, over and over, that it will beat CDs and Bonds. I'm asking you, besides the past performance reports, what ELSE are you going with that gives you confidence in these returns?
We already established that nobody here can project investment returns over 10 - 30 years, so why in the hell do you guys keep saying buy/hold the S&P index for 10 - 30 years and you will beat other passive vehicles? HOW do you know that??
So you guys keep talking about this 10 - 30 year period and you keep saying, over and over, that it will beat CDs and Bonds. I'm asking you, besides the past performance reports, what ELSE are you going with that gives you confidence in these returns?
In what sort of situation can you envision interest from loans exceeding profits from successful businesses in the long-term? That's the sort of world it would take for CDs and bonds to beat out indexed stock funds over long intervals.
Economic growth is ultimately what drive stock prices. The economy has been growing since we've started keeping records, and I have no particular reason to think it's going to be stopping any time soon. That's why I regard indexed stock funds as volatile over short terms, but a safe long-term investment (as safe, at least, as any other investment out there - none offer a 100% guarantee against loss).
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