Are Pos. Or Neg. On The Stock Market for The Next Three Years?

the funny thing is while we all like buying dips the reality is trying to buy low and sell high has lost more money for investors than any other mantra .

for one thing to buy the dips means you have to have un-invested cash sitting around . as peter lynch said more money has been lost or given up in anticipation of or in preparation for a down turn then has been lost in any downturn .

since markets are up 2/3's of the time and down only about 1/3 you rarely make enough in a dip unless you are a great timer then you gave up by not being invested with that money on the sideline .

the biggest problem is no one knows what is low .we all thought low in 2008 was when the markets fell 2000 points . well who knew we had 4000 more to go .

so many were either stopped out when limits were hit or they just plain panicked and bailed or realized they did not get a deal at all and threw in the towel.

so what has made the most money ?

buy high and sell higher , the trend is your friend .

in a dip odds are after you buy next stop is lower as objects in motion stay in motion . when going up , next stop is usually higher and you have to be pretty unlucky to lose money and be that person at the end of the line before a reversal .

so the point is i don't usually keep uninvested cash waiting for that proverbial dip as rarely do i make back what i gave up keeping that cash .

if you get to buy a dip when rebalancing , well that is a good thing . but rebalancing or dollar cost averaging have their own performance hurting issues as well.

about the best situation is you suddenly get some cash from something and at that moment buy in to a dip with money you never had prior sitting around .
 

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Thank God, I was able to retire early [age 55] debt-free and a nice nest egg without investing in the stock market.

Once I did put $2000 in a mutual fund which immediately lost one-fourth of my money during a boom time
when most everyone else was making money in stocks. That was my wake up call to go a safer route.

Ironically, I retired in 2007. I was so blessed to have zero money in the crashing 2008 stock market.
 
well it was only unlucky if you did the wrong thing and bailed . today if we did not tell the story we would never know it happened from where the funds grew to .

in fact kitces looked at the retiree who retired in to the crash in 2008. today they are just another average retiree group 10 years in .

markets are volatile over the long term but diversified funds have little risk . in fact 50/50 has never lost money in any 10 or 20 year time frame ever .
 

mathjak107 said:
in fact kitces looked at the retiree who retired in to the crash in 2008. today they are just another average retiree group 10 years in .

markets are volatile over the long term but diversified funds have little risk . in fact 50/50 has never lost money in any 10 or 20 year time frame ever
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Considering most people retire in their 60s [and many of them because of health issues]...
I wonder how many of them would die before that 10 or 20 year time frame.
 
it wouldn't matter . a retirement portfolio is structured by when the money is needed . even at 65 you need money for you and your spouse to eat in 20 to 30 years if you do make it out that far . that is still long term money ..

i have about 10 years of draw in an income model which is 75% bond funds and 25% a dividend equity fund . that is 75% less volatile than the s&p 500 . that is used to eat near term . all the rest is in a 60/40 growth and income model . there is lots of money in bonds if needed.

in a down stock market it would not be stocks that got sold , you rebalance and it would be bonds that would create cash . in a downturn there is a pretty good chance you will be rebalancing stocks by buying them .

i don't know why people think you throw all the money in to equities , that makes no sense . neither does , it is stocks that get sold in a down market . if stocks fell you are rebalancing by selling bonds not stocks .
 
I still enjoy being an active trader. No options, bonds or margin trading, just equities. I will do some short trading from time to time, but mostly, when I buy a stock, I will go long with it.

Earlier last year, I got burned pretty bad when I shorted GE, but you can win them all.
 
mathjak107 said:
in a down stock market it would not be stocks that got sold , you rebalance and it would be bonds that would create cash . in a downturn there is a pretty good chance you will be rebalancing stocks by buying them .

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Not if one dies in a down market.

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The last few weeks/months have been a boon for investors, even with the February downturn. But, I am becoming increasingly pessimistic about the outlook for coming months. Our government is playing Russian Roulette by reducing taxes, without plans for reducing spending. Just today, the Fed is talking about multiple rate hikes later this year, and dumping another trillion dollars of already shaky bonds into the market. Even with inflation at low levels, and employment holding fairly firm, it won't take much to spook investors if the Washington "smoke and mirrors" begins to unravel. Increasingly, there is little to support the dollar, other than Washington "promises". While many of the "experts" have been predicting that this Bull Market has plenty of room to run, I'm seeing more and more sentiment urging caution. I'm almost ready to take the gains, and dump most of my holdings into the money market, and perhaps even some precious metals, and prepare to ride out what is starting to look like a repeat of 2007.

Others Thoughts?????
 
Don M. said:
The last few weeks/months have been a boon for investors, even with the February downturn. But, I am becoming increasingly pessimistic about the outlook for coming months. Our government is playing Russian Roulette by reducing taxes, without plans for reducing spending. Just today, the Fed is talking about multiple rate hikes later this year, and dumping another trillion dollars of already shaky bonds into the market. Even with inflation at low levels, and employment holding fairly firm, it won't take much to spook investors if the Washington "smoke and mirrors" begins to unravel. Increasingly, there is little to support the dollar, other than Washington "promises". While many of the "experts" have been predicting that this Bull Market has plenty of room to run, I'm seeing more and more sentiment urging caution. I'm almost ready to take the gains, and dump most of my holdings into the money market, and perhaps even some precious metals, and prepare to ride out what is starting to look like a repeat of 2007.

Others Thoughts?????
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all i know is the cycles have always been part of the deal and have grown plenty of money . stocks have always been a longer term investment . it makes no sense as a long term investor to worry about temporary short term dips .

or try to mitigate them . odds are you will just end up reducing your long term gains trying to mitigate these short term issues
 
Don M. said:
The last few weeks/months have been a boon for investors, even with the February downturn. But, I am becoming increasingly pessimistic about the outlook for coming months. Our government is playing Russian Roulette by reducing taxes, without plans for reducing spending. Just today, the Fed is talking about multiple rate hikes later this year, and dumping another trillion dollars of already shaky bonds into the market. Even with inflation at low levels, and employment holding fairly firm, it won't take much to spook investors if the Washington "smoke and mirrors" begins to unravel. Increasingly, there is little to support the dollar, other than Washington "promises". While many of the "experts" have been predicting that this Bull Market has plenty of room to run, I'm seeing more and more sentiment urging caution. I'm almost ready to take the gains, and dump most of my holdings into the money market, and perhaps even some precious metals, and prepare to ride out what is starting to look like a repeat of 2007.

Others Thoughts?????
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For me the answer is somewhere between these two quotes from Jesse Livermore.

“If you can’t sleep at night because of your stock market position, then you have gone too far. If this is the case, then sell your position down to the sleeping level.” - Jesse Livermore

“The market does not beat them. They beat themselves, because though they have brains they cannot sit tight.” - Jesse Livermore
 
the problem for many is any allocation is to much for them . those who have allocations that are lower in equities are usually gun shy to begin with . they just end up having lower trigger points . to the human brain it hates losing money more than making money so usually in gun shy people any loss sets them worrying . studies show that balanced funds show no better investor behavior than growth funds do .

to date no investors ever lost money , or in fact did not make decent money from diversified funds ever in our history over the longer term . but lots was lost because of bad investor behavior . then those people blame markets of course for their actions .

riding the natural market cycles over the long term is volatile but it has been anything but risky unless you try to beat the markets at it's own game by thinking you will outsmart things . then you are really speculating not investing .

more retirements have ended up in the failed retirement graveyard from being to conservative than from markets . even if you had the nerve to use 100% equities in retirement and spent down in good or bad times from it you would have done only marginally worse than 50/50 did . i think out of the 117 rolling 30 year periods you failed 1 extra period . even 100% equities would have survived 93% of all the time frames to date just fine .

the biggest failures and lowest success rates came from avoiding equities as at a 4% draw rate inflation adjusted fixed income only survived 46% of the periods so far without taking a pay cut .
 
I've read the statistics and I don't disagree but sometimes it's not about making or losing money, it's about having enough cash to pay the bills.

“We were always focused on our profit and loss statement. But cash flow was not a regularly discussed topic. It was as if we were driving along, watching only the speedometer, when in fact we were running out of gas.”— Michael Dell
 
it is all about having enough to pay bills but this fixation on you need loads of cash to do that or you even need cash to do that is flawed . rebalancing a standard 50/50 , 60/40 etc provides all the needed money most would need for the year and in fact this has been the traditional way of doing it since the beginning of when people retired and needed to create their own incomes ..

there is nothing magical about cash that cannot be done through just rebalancing a portfolio and that is something many do not understand . we create each years cash on jan 1 for spending . everything else we need for the next 10 years is in an income portfolio with about 25% in a dividend equity fund . no more cash than that 1 year is really needed and if it was i could rebalance the income model and free up more .

being to cash heavy hurts folks more than helps and the less you have the more important it is to get this balance right . there is little reason to hold low yielding cash when a ultra conservative income model can do so much better .
 
as top researcher michael kitces said :

Cash reserve strategies that hold aside several years of spending to avoid liquidations during bear markets are a popular way to manage withdrawals for retirees. In theory, the strategy is presumed to enhance risk-adjusted returns by allowing retirees to spend down their cash during market declines and then replenish it after the recovery. Yet recent research in the Journal of Financial Planning reveals that the strategy actually results in more harm than good; while in some scenarios the cash reserves effectively allow the retiree to “time” the market by avoiding an untimely liquidation, more often the retiree simply ends out with less money due to the ongoing return drag of a significant portfolio position in cash. As a result, the superior strategy for those who want to alter their asset allocation through market volatility (the effective result of spending down cash in declines and replenishing it later) appears to be simply tactically altering asset allocation directly, without the adverse impact of a cash return drag. Nonetheless, this still fails to account for the psychological benefits the client enjoys by having a clearly identifiable cash reserve to manage spending through volatility – even though the reality is that it results in less retirement income, not more.
 
I hope that your fixation with being fully invested serves you as well as my fixation with maintaining a cash reserve serves me.

The difference between us may be that I invest mainly in balanced funds and do not normally invest in stock funds or bond funds so the rebalancing is done for me and not by me.

So anyway, do you think the rain will hurt the rhubarb.
 
Aunt Bea said:
I hope that your fixation with being fully invested serves you as well as my fixation with maintaining a cash reserve serves me.

The difference between us may be that I invest mainly in balanced funds and do not normally invest in stock funds or bond funds so the rebalancing is done for me and not by me.

So anyway, do you think the rain will hurt the rhubarb.
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not sure where you would get i am fully invested in retirement from . i range from 40-60 to 50/50 as a max . i have not been 100% equities since before i was ready to retire.

hordes of cash is not a good idea for the most part
 
mathjak107 said:
not sure where you would get i am fully invested in retirement from . i range from 40-60 to 50/50 as a max . i have not been 100% equities since before i was ready to retire.

hordes of cash is not a good idea for the most part
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Again our understandings differ, if I used the term fully invested incorrectly then I apologize.

fully invested - Investment & Finance Definition. A condition in a portfolio in which only a minimum amount of cash is being held and virtually all funds are invested in stocks, bonds, or other investments.
 
bonds have always worked better than holding cash over longer periods . if you look at the TOTAL returns on bonds since 2008 as an example vs cash , you grew way way more money with bonds . now that the cycle is changing you will likely have about 2x as much even if bonds dip, then what you would have accumulated using cash ,using an assortment of bonds funds instead of cash over the years .

even with rates rising the difference in rates will likely still beat cash . there were lots of studies done on using cash buffers and all showed the same lack of benefit compared to simply rebalancing equites and bonds
 
It's hard to be positive on the stock market short term. And I would say 3 years is on the short term side. The recent 10% correction was almost like a brief hiccup that has already been forgotten. I could easily see a 20-30% pullback which would be painful.... but normal. But what do I know?.....I thought the market was overpriced some 7-8k points ago. As far as my AA goes, I went conservative some time ago. When I worked I was an 80/20 guy. Right now I have less than 20% in stocks and the rest in short duration bonds and a ladder of cd's. Portfolio won't grow much but I'm more about preservation at this point. A w/d rate of 1.5% and SS takes care of my budget and allows me to be conservative.
 
i stay 40-50% equities and learned along time ago not to try to play the timing game . equities are for eating in 20-30 years god willing .short term i could not care less how they cycle . it is all part of it .
 
mathjak107 said:
returns will likely be more subdued after the big run up but things are still very positive looking .

don't fall in to a false sense of confidence because you are getting a dividend . a dividend is no different than you selling equal dollars from your portfolio . down is just as down and it is only total return that counts.

dividends are not like interest and go on top of principal; . dividends are a sale of a piece of your share value which they hand back to you . there is a big difference between interest and dividends in that respect .

have 100k invested in a bank and 5% interest leaves you with 105k .

100k in a dividend stock that pays out 5% leaves you with 5k in hand and 95k left compounding by the markets at the ring of the bell. if you reinvest the dividend you merely have your 100k back you had before the payout .

exchanges always have to reduce the value of your investment by the amount of the payout .

so don't think being down does not matter if you are getting a dividend , it sure does .
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I always like to read your take on a financial subject. I've read what you said about dividends before but here's what you seem to have left out each time. Yes dividends reduce the share price (NAV) by the amount of the dividend per share but if reinvested, you also get more shares. And more times than not (at least with my investments), those shares regain the NAV they were at before the dividend payout plus more. So if I had 1400 shares of a particular fund and the reinvested dividends throughout 2017 added generated 100 more shares of that fund which saw the dividend reduce it from $18.50/share to $18.25/share then the share price rises to $19.50, I've made $1.25 on 1500 shares (instead of just 1400 shares). If that happens with several thousand shares of various funds and ETFs, then the owner makes money two ways on those dividends. That 100K does indeed become 105K or more. I keep a dividend tracker that shows the increased value of the added shares according to the daily change in share prices. Unfortunately it stopped automatically tracking daily share price and net increases after a certain line but I can still do it manually whenever I want. I can no longer find that particular template
 
don't get confused by the market action or number of shares . it is only total dollars in the investment that is compounding for you .

if you had 100k in stock and it grew 5% over the year as an example you have 105k in value . if it pays out a 5% dividend you have 100k left at the open once the exchanges reduce you and a 5K dividend . so you reinvest it . you have the exact same 105k you had the night before once it is back in and being compounded on by the markets . the dividend did not add any additional dollars to your investment than you had . it merely switched the consistency from say 1000 shares at 105 dollars a share to 1050 shares at 100 a share at the open . dollars compounding are the same as you had pre ex div . whether you have 1000 shares at 105 or 1050 shares at 100 at the ring of the bell is irrelevant . only the dollars compounding are acted on .

if your stock went up 10% the next quarter and you reinvested than it is 10% on 105k , if you pocketed the dividend than you only had 100k compounding that 10%.

people get confused because the shares are growing and markets are running with the price but it is far more basic than that . as you see in the example it is only about dollars left compounding on by the markets . the consistency of the make up of the investment is irrelevant .

1 share of a 100k stock going up 10% is the same as 2 shares of a 50k stock going up 10% . you are just confusing the issue in your example . it is only about i started with x invested , i saw y percentage of compounding on those opening dollars and this is my new balance .

there is zero additional dollars added when that dividend is paid out then you had the evening before it went ex div , you are just starting out of the gate with more shares if you reinvested at a lower value . whatever the percentage is the markets move it up or down is on those opening dollars not shares .
 
I'm heavily into dividend-paying stocks too. Many companies pay a good dividend, and this seems to function independently from what the stock market as a whole is doing.
 

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