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Author Topic: Stocks, bonds and investing  (Read 79969 times)
Yegolev
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Reply #175 on: April 15, 2015, 11:24:15 AM

The answer, or an answer? Ohhhhh, I see.

It's all rather mysterious but I trust in the greed of others to continue the market trends upward.  At the moment, I think Earth is too big to fail.

Why am I homeless?  Why do all you motherfuckers need homes is the real question.
They called it The Prayer, its answer was law
Mommy come back 'cause the water's all gone
shiznitz
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the plural of mangina


Reply #176 on: April 15, 2015, 01:33:19 PM

I would also point people to the Acorns app. It rounds up all your CC purchases to the next dollar, putting those extra cents into an investment account. No fees.

I have never played WoW.
slog
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Reply #177 on: April 15, 2015, 07:23:04 PM

How did I miss this thread?  I just buy index funds and never sell. 

CEO of Douchebag, Inc.
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Viin
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Reply #178 on: April 16, 2015, 01:07:26 PM

How did I miss this thread?  I just buy index funds and never sell. 
No no, day trading is where it's at. I gained 2% just yesterday!

- Viin
Paelos
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Reply #179 on: April 16, 2015, 01:40:02 PM

How did I miss this thread?  I just buy index funds and never sell. 

And the hilarious thing? If you just bought the S&P and let it ride, you do better than most professional traders.

CPA, CFO, Sports Fan, Game when I have the time
Quinton
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Reply #180 on: April 17, 2015, 07:18:07 AM

How did I miss this thread?  I just buy index funds and never sell. 

And the hilarious thing? If you just bought the S&P and let it ride, you do better than most professional traders.

That's been working great for me.  Trying to beat the market seems like a lot of work for uncertain success, but index funds are nice and straightforward.  I'm probably a bit too heavy in S&P and a couple other stock indexes vs bonds even so...
Shannow
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Reply #181 on: April 17, 2015, 08:36:09 AM

How old are you?

Someone liked something? Who the fuzzy fuck was this heretic? You don't come to this website and enjoy something. Fuck that. ~ The Walrus
shiznitz
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Reply #182 on: April 17, 2015, 12:04:21 PM

I am 46 and I don't own bonds. I view my salary as my bonds.

A large part of why I don;t own bonds even at an age where almost all retirement "models" would give me at least 20% is that rate are so low it creates an adverse risk-return situation.  If you buy a 10 year bond that yields 2% and interest rates rise 1%, the bond will drop 10% in value. The inverse is also true. This effect is called duration if anyone wants to look it up and learn something most non-finance people don't know.

So, with rates at record lows, I would stash a bit in cash and earn nothing that put money where I might earn 2% or -10%.

I have never played WoW.
Shannow
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Reply #183 on: April 17, 2015, 12:42:46 PM

A lot of retirement models are crap. Stick it all in stocks and lose the password for 5 years.

As you get closer to retirement the reason to own bonds is to avoid the soul crushing losses that a buy and hold portfolio can take if the cycle breaks wrong.
You are correct that bonds are a bit problematic right now as yields are extremely low, but any upswing in yields will also mean a down swing in value. Bond funds have benefited from a very friendly interest rate environment for the last 15 years (and yes you can make the argument that its been 35 years).
However the industry has been talking about rising rates now for 6 years and we haven't seen shit, look at long bond returns in 2014. Everyone went short duration in 2013 and it turned out that long bonds were the best performing asset class (mothersuck).

So the question is , what are your 'bonds' for? Return? Volatility management? Start educating yourself on deeper ways to assess the investments you buy. Specifically correlation and downside deviation. You want to look for funds that have like downside to the bond market but don't correlate to it. They do exist.

Someone liked something? Who the fuzzy fuck was this heretic? You don't come to this website and enjoy something. Fuck that. ~ The Walrus
shiznitz
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Reply #184 on: April 17, 2015, 03:24:31 PM

You ask the right questions. I do not view bonds as a source of return since rates are so low. Therefore, I prefer to increase my cash holdings as the market rises so that I can buy back into stocks at a later date.  I have the luxury of a mostly complete nest egg. For those just getting started, "buy stock index funds and lose the password" is a good attitude.  Even better, work for an employer that offers 401k matching. There is no investment on earth better than 401k matching.

I repeat: THERE IS NO INVESTMENT ON EARTH BETTER THAN 401K MATCHING.  It is worth a 10%+ lower salary when you consider the after tax and compunding benefits.

When investing, always ask yourself "how wrong can I afford to be today?" This is a good question to ask yourself every 6 months or so.

Time will eventually heal mistakes as long as you don't let panic push you out completely.

I have never played WoW.
Shannow
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Reply #185 on: April 17, 2015, 03:31:19 PM


When investing, always ask yourself "how wrong can I afford to be today?"


I am so stealing this line.

Someone liked something? Who the fuzzy fuck was this heretic? You don't come to this website and enjoy something. Fuck that. ~ The Walrus
Nebu
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Reply #186 on: April 19, 2015, 05:34:46 PM

To this point in my life I've been VERY conservative.  While most of my friends scoffed at this, my portfolio was making money in 2008 when they all took a 40% hit.  Yes, most of them have made their losses back by now but did so at the cost of a lot of fucking stress.  I'm fine with a steady 5-8% per year gain because I get a 10% match from my employer.  I'm pretty risk adverse.

"Always do what is right. It will gratify half of mankind and astound the other."

-  Mark Twain
Torinak
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Reply #187 on: April 19, 2015, 07:10:01 PM

To this point in my life I've been VERY conservative.  While most of my friends scoffed at this, my portfolio was making money in 2008 when they all took a 40% hit.  Yes, most of them have made their losses back by now but did so at the cost of a lot of fucking stress.  I'm fine with a steady 5-8% per year gain because I get a 10% match from my employer.  I'm pretty risk adverse.

There are no conservative investments that make anywhere near 5% a year, let alone more than 1-2%, and that's nominal and not real. Conservative real returns are zero, or even negative now.
Nebu
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Reply #188 on: April 19, 2015, 08:30:56 PM

There are no conservative investments that make anywhere near 5% a year, let alone more than 1-2%, and that's nominal and not real. Conservative real returns are zero, or even negative now.

Explain.

"Always do what is right. It will gratify half of mankind and astound the other."

-  Mark Twain
Torinak
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Reply #189 on: April 19, 2015, 08:52:15 PM

There are no conservative investments that make anywhere near 5% a year, let alone more than 1-2%, and that's nominal and not real. Conservative real returns are zero, or even negative now.

Explain.

Conservative investments are usually bonds, especially US treasuries. The yield on the 30-year US treasury is currently 2.51%. If inflation is 2.5%, that means the treasury effectively yields 0 over a 30-year timespan. If it's higher, it loses buying power. The current rate on a 30-year TIP is 0.54%, which means that it returns 0.54% more than inflation a year, for 30 years.

In Europe, some banks are actually charging people for holding their savings, in the form of negative interest rates. Those are negative nominal yields, so adding any inflation just makes the losses even higher.

A conservative long-term portfolio is usually at least 50% bonds, if not more. Such a portfolio would have lost about 15-20% in 2008. In the past (prior to this ultra-low-yield environment), such a portfolio has usually returned 5-8% nominal (2-5% real) over the long term with annual rebalancing. That was back in the day when long-term yields were a heck of a lot higher (if you're old enough, you might remember 10% CD rates!); with the current low bond yields many feel that a 3-5% nominal return is probably as good as it'll get on a 50-50 portfolio over the next few decades. A 50-50 portfolio will still drop in value quite a bit when there's another major correction in the stock market.

There are some stable value funds which are restricted to institutional investors and usually have minimum investments in the millions to tens of millions; they show up in some 401k plans. They may yield around 3-4% nominal now, but those rates are subject to fluctuation (NOT guaranteed over any long time period), and there are usually a lot of restrictions on how you can access your money such as mandatory advanced notification before withdrawals, very limited numbers of withdrawals per year, etc. If you're fortunate to have access to one, these days it's often a good replacement for bonds in one's portfolio.
Nebu
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Reply #190 on: April 20, 2015, 01:11:22 AM

Good stuff.

That's wonderful stuff.  Thanks for taking the time. 

My investments are in a low-risk diversified portfolio with some guaranteed and some low risk (blue chip) investments.  Perhaps I'm too stupid to label it properly.

"Always do what is right. It will gratify half of mankind and astound the other."

-  Mark Twain
Paelos
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Reply #191 on: April 20, 2015, 08:04:38 AM

Torinak is right in that simply putting money in T-bills or CDs right now is a complete waste of time. The interest rates are so bad it's costing you money to put them there, when you're better off putting them in things like municipal bonds which have more risk but provide more tax-advantaged returns.

Here's the thing, there's risk everywhere. You have to be comfortable with the idea that risk exists and not just sit on your money. Because at the end of the day, you will absolutely not lose your ass long term in the market. It's all about riding short term (see less than 4 years) waves.

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Shannow
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Reply #192 on: April 20, 2015, 11:07:12 AM

I'm interested to see what rates as high-risk in Nebu's estimation. :)

You may not lose your ass long term in the market (well let's hope not otherwise we are all fucked) however there can be large amounts of volatility and long term periods of flat returns. These don't matter so much at 40 but they DO matter a hell of a lot at 60, 65, 70 etc.

Someone liked something? Who the fuzzy fuck was this heretic? You don't come to this website and enjoy something. Fuck that. ~ The Walrus
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Reply #193 on: April 20, 2015, 11:48:22 AM

I'm interested to see what rates as high-risk in Nebu's estimation. :)

Options scare me. So do initial offerings.

"Always do what is right. It will gratify half of mankind and astound the other."

-  Mark Twain
Torinak
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Reply #194 on: April 20, 2015, 01:51:35 PM

I'm interested to see what rates as high-risk in Nebu's estimation. :)

Options scare me. So do initial offerings.

Both of those are almost always good ways to lose money, so it's not a bad thing to be scared of them. :)

And it's fine to be conservative in one's investments, as long as the ramifications are understood. My portfolio is a bit more conservative than it "should" be for my age, but my current allocation satisfies two very important criteria: it's very likely to give enough for a very long retirement at my family's accustomed standard of living, and it lets me sleep at night.

It's much better to accept lower returns and just work a few more years (or save more aggressively, never a bad thing!) than to take so much risk that it keeps you up at night, or worse yet, makes you panic and sell low, then wait so long you end up buying high.
Nebu
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Reply #195 on: April 20, 2015, 05:00:09 PM

It's much better to accept lower returns and just work a few more years (or save more aggressively, never a bad thing!) than to take so much risk that it keeps you up at night, or worse yet, makes you panic and sell low, then wait so long you end up buying high.

That's my outlook.  I already plan to work until I'm 70 as I enjoy my career (for the most part).  My standard of living is so low with $1500 a month student loan payments that I'll feel downright wealthy when they go away in 3 years.

"Always do what is right. It will gratify half of mankind and astound the other."

-  Mark Twain
Paelos
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Reply #196 on: April 20, 2015, 05:57:54 PM

I have a target annual withdrawal of $75k per year after I hit age 60, adjusted upward by 2% per year thereafter. That's relatively simple for me to plan, and execute with a nestegg that's a little over a $1.5M.

That's also assuming I've paid off property and I don't have any kids to support post-college, which are going to be other investment holdings anyway.

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shiznitz
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Reply #197 on: April 21, 2015, 11:46:24 AM

I'm interested to see what rates as high-risk in Nebu's estimation. :)

Options scare me. So do initial offerings.

Both of those are almost always good ways to lose money, so it's not a bad thing to be scared of them. :)


Very true. By their very nature, options decline in value as time passes. Still, I am willing to lose 1-2% of my portfolio value when the market has had a big run by buying puts.  If the market doesn't fall, then I don;t really miss than 1-2%.  If it does, the puts turn a 15% decline into a 10-12% decline.  Still, not for the faint of heart and not for the inexperienced investor.

Right now I have puts on TLT (30yr Treasury ETF) which will make me money if the Fed raises rates this year, athenahealth (ATHN), WUBA and VEEV.  If they all fail, I lose 5% of my trading portfolio which is about 10% of my total savings.
« Last Edit: April 21, 2015, 11:50:15 AM by shiznitz »

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Paelos
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Reply #198 on: April 21, 2015, 02:24:48 PM

I'm dumping one of my regular REITs and buying into Medical REITs.

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Viin
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Reply #199 on: April 21, 2015, 04:02:49 PM

I have a target annual withdrawal of $75k per year after I hit age 60, adjusted upward by 2% per year thereafter. That's relatively simple for me to plan, and execute with a nestegg that's a little over a $1.5M.

That's also assuming I've paid off property and I don't have any kids to support post-college, which are going to be other investment holdings anyway.

Whenever I do a calculator, it always adds inflation to my salary to calculate my future earnings .. even using a 2% inflation rate by the time I retire my total household income is something like 500k/year. And of course "they" expect you to take 75-80% of your then-current earnings for retirement funds. That's $375k/year for retirement! Which is super crazy. (So is making 500k year in 20 years).

So I decided to make my own calculator (using the output of one of the ones I linked above as a starting point) and basically kept my earnings flat (1% growth) for the next 20 years. Took 75k in todays dollars and inflated it by 2% for the next 20 years, which put me at $109k/yr in retirement (+ 2% year for inflation to be conservative).

Anything like this sound reasonable or way too complicated? Missing anything obvious? (Happy to share my spreadsheet if anyone wants to see the calculator in action)

- Viin
shiznitz
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Reply #200 on: April 22, 2015, 10:07:07 AM

I like your assumptions better.

I have never played WoW.
Torinak
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Reply #201 on: April 22, 2015, 01:57:29 PM

Whenever I do a calculator, it always adds inflation to my salary to calculate my future earnings .. even using a 2% inflation rate by the time I retire my total household income is something like 500k/year. And of course "they" expect you to take 75-80% of your then-current earnings for retirement funds. That's $375k/year for retirement! Which is super crazy. (So is making 500k year in 20 years).

So I decided to make my own calculator (using the output of one of the ones I linked above as a starting point) and basically kept my earnings flat (1% growth) for the next 20 years. Took 75k in todays dollars and inflated it by 2% for the next 20 years, which put me at $109k/yr in retirement (+ 2% year for inflation to be conservative).

Anything like this sound reasonable or way too complicated? Missing anything obvious? (Happy to share my spreadsheet if anyone wants to see the calculator in action)

Using real returns and real dollars can simplify calculations. Subtract expected inflation from expected nominal returns to get expected real returns, and all calculations are then in real (inflation-adjusted) dollars. Keeping things in real terms can also make goals seem more obtainable, as it can be less daunting to think about needing $X in today's dollars to retire instead of needing $4X in future dollars, even if the spending power is the same.

Omitting or underestimating the effects of inflation can be very bad. Even trailing inflation by 1% in one's accumulation ends up with an effective shortfall of nearly 20% after only 20 years.

Sequence of returns risk is something that's very hard to capture in a simple spreadsheet, and it can make an enormous difference. If one is anticipating needing to spend 3% of one's retirement portfolio every year and the market drops 50% the year you retire, an all-stock portfolio means that your withdrawal rate is effectively 6%...which means you'll probably run out of money long before you die. Mitigating this risk is one of the main factors behind the suggestion that portfolios become more conservative as one ages (more bonds, less stocks, like the "100% - age in bonds" rule of thumb), as there's less time to recover from a significant drop. Monte Carlo simulators or sequence-based ones like Firecalc can illustrate the impacts of sequence of returns in a very vivid fashion.
Paelos
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Reply #202 on: April 22, 2015, 02:07:39 PM

But for terms of planning, I'm not sure you want to go that far down the rabbit hole. The basic idea is that as you draw closer to retirement, you'll have a better idea of what you need to live on going forward. Trying to guess at a number that's a moving target of inflation or need 25 years into the future isn't the best way to plan.

The reality is you should be putting 10% away for retirement at the bare minimum, and if you can comfortably do more, that's even better. Each early dollar creates higher returns later.

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Torinak
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Reply #203 on: April 22, 2015, 03:07:03 PM

But for terms of planning, I'm not sure you want to go that far down the rabbit hole. The basic idea is that as you draw closer to retirement, you'll have a better idea of what you need to live on going forward. Trying to guess at a number that's a moving target of inflation or need 25 years into the future isn't the best way to plan.

The reality is you should be putting 10% away for retirement at the bare minimum, and if you can comfortably do more, that's even better. Each early dollar creates higher returns later.

As long as one isn't using overly optimistic projections or unrealistically rosy assumptions to justify lower savings rates, I agree.

I've seen otherwise bright people totally ignore inflation in their retirement projections, so they "could" save a low single digit percentage and spend more now. Thankfully, showing them the exponential graphs using even modest inflation estimates (2%) brought most of them around and they upped their savings to 10-15% at least. 10-15% is a good baseline given the near-total absence of pensions these days.

A double bonus of saving more earlier is that it helps prevent lifestyle creep--if one gets used to living less extravagantly, one will "need" less in retirement to maintain the same standard of living. That means an earlier retirement becomes an option, which is always a nice option even if one loves one's job. Money buys freedom, and all that.
Paelos
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Reply #204 on: April 22, 2015, 10:26:26 PM

A double bonus of saving more earlier is that it helps prevent lifestyle creep--if one gets used to living less extravagantly, one will "need" less in retirement to maintain the same standard of living. That means an earlier retirement becomes an option, which is always a nice option even if one loves one's job. Money buys freedom, and all that.

That's really what I impress upon people. You can live how you want, but you have to understand the ramifications of rampant consumerism or depreciating assets.

CPA, CFO, Sports Fan, Game when I have the time
Hawkbit
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Reply #205 on: June 17, 2015, 10:46:11 AM

I'm an hour and eight phone calls into a simple rollover I want to do from an IRA to my 401k. Forms are being physically mailed from the funds recipient, so I can sign them, so I can forward them to the holder. Who in turn has to send those to the recipient.

I don't understand why the investment industry is still stuck in the 80s as far as process goes. Fucking web forms, folks.
Shannow
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Reply #206 on: June 17, 2015, 11:04:01 AM



I don't understand why the investment industry is still stuck in the 80s as far as EVERYTHING GOES

Fify.

Don't worry robo-advisors are here to save the day.

Someone liked something? Who the fuzzy fuck was this heretic? You don't come to this website and enjoy something. Fuck that. ~ The Walrus
Paelos
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Reply #207 on: June 17, 2015, 01:11:40 PM

I'm an hour and eight phone calls into a simple rollover I want to do from an IRA to my 401k. Forms are being physically mailed from the funds recipient, so I can sign them, so I can forward them to the holder. Who in turn has to send those to the recipient.

I don't understand why the investment industry is still stuck in the 80s as far as process goes. Fucking web forms, folks.

Blame the laws and the lawyers. They don't know how to adapt the laws and regulations to a digital world yet.

CPA, CFO, Sports Fan, Game when I have the time
Yegolev
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Reply #208 on: June 17, 2015, 02:30:51 PM

I was able to just call Previous 401k Firm and have them write a check made out to My Rollover Firm, which was mailed to me to then mail to my firm.

Why am I homeless?  Why do all you motherfuckers need homes is the real question.
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Reply #209 on: June 17, 2015, 02:51:38 PM

401 to 401 is easy like that and I've done the same a few times over the years when switching jobs if my balances were  a few times greater than my vested balances. 

However, he said IRA to 401.  I can totally believe that would be a byzantine process because you're putting taxed money into a pretax investment fund.  I didn't even know you could do that, I thought it'd have to remain in another IRA type of account.

The past cannot be changed. The future is yet within your power.
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