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one thing you have to always remember when it comes to down years is this :
you always hear how if you fall 50% you have to come back 100% but the fact is if you are more aggressive you most likely will be falling from levels you would never be at in the first place if you were a lot more conservative over the long term . a typical accumulation period spans decades . . .
while wellesley is a good fund, if we bought fidelity contra on the same day as wellesley started which was 07/01/1970 , 10k in wellesley grew to 819k, not bad , right ? . on the other hand 10k in fidelity contra grew to 3.40 million .
so you could lose 1/2 your money and stll be way a head of wellesley .
so everything is alway relative.
yeah ,folks talk about losing 40% in 2008 but for a long term investor they may still be a head even falling 40% from where a much more conservative model would have been .
how much could you lose from an investment in contra long term compared to hiding in fixed income because you are afraid of losses ?
just something to think about when you start to think in terms of what if i fall x-percent . it may very well still leave you at levels higher than you would have been .
Last edited by mathjak107; 08-14-2017 at 02:44 AM..
Daveinmtairy, the vanguard funds you mentioned sound good. Can you set up an account on your own with Vanguard or is it best to go through Fidelity if you have an established IRA?
You can do it either way. Probably simpler and possible without extra fees to go directly to Vanguard.
you can not buy the cheaper vanguard admiral versions of the shares from fidelity . you have to buy them from vanguard directly if you have a fidelity account . only regular class shares are available through fidelity .
one thing you have to always remember when it comes to down years is this :
you always hear how if you fall 50% you have to come back 100% but the fact is if you are more aggressive you most likely will be falling from levels you would never be at in the first place if you were a lot more conservative over the long term . a typical accumulation period spans decades . . .
while wellesley is a good fund, if we bought fidelity contra on the same day as wellesley started which was 07/01/1970 , 10k in wellesley grew to 819k, not bad , right ? . on the other hand 10k in fidelity contra grew to 3.40 million .
so you could lose 1/2 your money and stll be way a head of wellesley .
so everything is alway relative.
yeah ,folks talk about losing 40% in 2008 but for a long term investor they may still be a head even falling 40% from where a much more conservative model would have been .
how much could you lose from an investment in contra long term compared to hiding in fixed income because you are afraid of losses ?
just something to think about when you start to think in terms of what if i fall x-percent . it may very well still leave you at levels higher than you would have been .
But you are comparing a large stock growth fund with a much more conservative fund carrying more bonds. So naturally over the last 47 the growth fund will have gone up more than the fund primarily carrying bonds. With the OP at 65 and 69 and looking for money for emergencies I'm not sure he/she has the timeline or tolerance for such ups and downs Contra will provide.
many times we go more conservative because we fear being down , but the truth is many times what you are down leaves you still higher than the more conservative route you took trying to reduce the drops.
in fact my long term money is still in a 100% equity growth model . i am 65 but i won't eat with that money for 20-30 years god willing .
the money i need shorter term is in models that match the time frame .
but putting retirees a side , the point i made is a very important consept to remember for those who think they are avoiding being down more so they choose more conservative paths when they are younger .
they talk about how they don't want to lose 40% but the reality is they can still be a head of where they are even down 40% over the long haul .
when someone is very risk averse odds are they will not stay even in more conservative models either . a loss is a loss to them and once that trigger point is hit they become ill-rational regardless .
all data shows that poor investor behavior is pretty much just as poor in balanced funds as it is in growth funds .
i am not saying everyone should be 100% equities , but i am saying many times the logic for not has no real logic .
mitigating short term temporary drops when you are a long term investor and permanently reducing your long term gains to do it has no logic to it , yet how many times do you see advice given to do just that
Last edited by mathjak107; 08-14-2017 at 04:45 AM..
one thing you have to always remember when it comes to down years is this :
you always hear how if you fall 50% you have to come back 100% but the fact is if you are more aggressive you most likely will be falling from levels you would never be at in the first place if you were a lot more conservative over the long term . a typical accumulation period spans decades . . .
while wellesley is a good fund, if we bought fidelity contra on the same day as wellesley started which was 07/01/1970 , 10k in wellesley grew to 819k, not bad , right ? . on the other hand 10k in fidelity contra grew to 3.40 million .
so you could lose 1/2 your money and stll be way a head of wellesley .
so everything is alway relative.
yeah ,folks talk about losing 40% in 2008 but for a long term investor they may still be a head even falling 40% from where a much more conservative model would have been .
how much could you lose from an investment in contra long term compared to hiding in fixed income because you are afraid of losses ?
just something to think about when you start to think in terms of what if i fall x-percent . it may very well still leave you at levels higher than you would have been .
I agree with you, but I just don't think most of us have the guys to hang on when times get rough. Wellesley Income is a much better fund for someone who is security oriented. That's doubly true given stock market valuations. Nobody is saying stocks are cheap. Some say stocks are fairly valued. Others saying way overvalued.
Last edited by mysticaltyger; 08-14-2017 at 11:38 PM..
Daveinmtairy, the vanguard funds you mentioned sound good. Can you set up an account on your own with Vanguard or is it best to go through Fidelity if you have an established IRA?
Yes, you can definitely set up an account on your own with Vanguard.
Has anyone mentioned ETFs instead of mutual funds? How about sector ETFs (or sector funds)?
Allows diversification this way and allows you to sell throughout the day rather than waiting to the end of the day's price like mutual funds. Perhaps break the $150k into 6-7 sector ETFs. Vanguard has all of this and easy to do w/ a phone call. The other thing that needs to be mentioned is using dollar cost averaging and not plugging the $150k all in one day....perhaps invest it over the course of 6-12 months? Another option would be dividend paying mutual funds that OP could get a little monthly or quarterly cash flow. Vanguard sells Admiral Shares to portfolios over $100k - those shares provide lower expenses/fees (Expense ratio 0.08% for Dividend Appreciation Fund - Admiral). https://personal.vanguard.com/us/fun...NT&FundId=0602
Many people w/ this kind of lump sum head to annuities for a monthly income. I don't have much experience w/ that but do hear all kinds of warnings from consumer financial advisers/experts in the media. The commissions are high from my understanding. But it is an option an adviser might steer you toward.
Ric Edelman has a diversification tool that guides you to which sectors a diversified portfolio might include. It looks complicated, but it's simple. Answer 6-7 questions and it gives you a suggested portfolio. You can pick up Vanguard funds or ETFs in the sectors the tool recommends. A diversified portfolio smooths out the roller coaster ride that you're bound to go on if you plug all $150k into one index fund like the SP 500. I'm pretty sure if OP plugged in his details it would recommend Bond Funds > Stock Funds. But his total financial picture (pensions, IRAs, real estate, etc) would need to be looked, I'm sure.
I agree with you, but I just don't think most of us have the guys to hang on when times get rough. Wellesley Income is a much better fund for someone who is security oriented. That's doubly true given stock market valuations. Nobody is saying stocks are cheap. Some say stocks are fairly valued. Others saying way overvalued.
risk adverse people don't hang on generally no matter what the allocation when things crumble .
but that was not the point of what i was saying .
my point is that you see people talk about falling x-percent in a down turn . but they fail to realize many times the level you fall to is a level you wouldn't even be at taking a more conservative route .
even with the 40% drop in 2008 , which didn't stick around long , you still would have been way a head of a more conservative path , ala my my contra vs wellesley comparison .
just something to keep in the back of one's mind when they think they are avoiding steep losses. it can be quite mind blowing when you look at something like that comparison and realize yeah ,you can fall a lot , but you can actually still be way ahead vs not doing it .
even a 1% difference over decades of time can be quite substantial in the long term and that provides plenty of cushion for the down turns ..
that is why even 100% equities in retirement has always had a very very high success rate . the up years more than make up for the down years so not having the weight of bonds provides a much higher cushion for the down years .
most of us all say we don't want the steep drops of 100% equity but we forget those drops tend to come from much higher levels .
of course i am not recommending everyone go 100% equities . but i am saying keep in mind the logic of what you do .
because our emotions play a large part in our actions with our money we tend to fall victim to doing a lot of things that really have no logical sense behind it and only serve to hurt us financially or cut our performance .
i always looked at investing as my money working for me while i work for my money . the same way i want to earn top market wage for what i do , i want my money to work and earn top market wage for what it does based on the criteria i feel is important to me at any point in time . that criteria can change as we do .. .
Last edited by mathjak107; 08-15-2017 at 04:16 AM..
A certified financial planner (w/ fiduciary responsibility) would probably be best as recommended (fee only).
Possibly this market is inflated and wouldn't it be terrible to place $150k in the market in something like a SP 500 index and have a market correction immediately afterwards.
Sometimes putting the money in a 1-2% bank product (ie CD, savings) is a wise move, especially for a retiree who might not have the time to make up for the correction or a big market fall.
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