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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
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..
"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
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.
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.
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..
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
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."
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
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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. 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.
