Stock Markets hit record highs

Don M.

Don M.

SF VIP
Location
central Missouri
Today, all 3 major indexes reached record highs, with the Dow closing over 20,000. It will be interesting to see how long this "Trump" rally will last, and how high the markets will go....or if a "correction" is about to occur. Most of the "pundits" are saying that there is more strength in the fundamentals....we shall see.
 

I got a text alert at work when it hit 20,000 and almost cheered! People at work don't seem to be savers or investors so don't think they would understand.
 
I remember the Dow hit 1,000 in November 1972 when Nixon got reelected and then dropped like a rock in 1973, it finally clawed it's way back to 1,000 in 1980 when Reagan got elected. I guess it pays to invest for the long haul!
 

I was almost tempted to move to the money market when I watched the election returns coming in, and the Dow moved down almost 900 points. Then, the next day, when reality set in, the markets began this move upwards, and the returns have been great. I guess the business world, and the bulk of the investors are optimistic about Trump...no matter how Whacko he sounds sometimes. I am still not Convinced, and have been checking the markets a couple times a day, and looking at a lot of opinions from respected "guru's....most of whom still seem to remain positive.
 
People old enough to be on a senior forum probably are not looking to invest for the long term. I invest mostly in stocks and mutual funds that pay good dividends. That way you can make money whether the price of the stock is up or down. If the price increases that's a bonus.
 
If you have a balanced portfolio there is no reason to be jumping in and out of the stock market. You lose money buying and selling your positions and lose money trying to decide when to get back in and miss some or all of the upside. Even with the down turn in 2008-9, it only took my portfolio 1 1/2 years to recover.

Quote "People old enough to be on a senior forum probably are not looking to invest for the long term" Long term is any investment held over a year so I hope that seniors can manage to hang on for that time period.:D People are living longer in retirement. Even if you retire in your 60's you still have 10, 20, 30 years until you meet your maker. That seems pretty long term to me. Seriously, if you have money to invest in your retirement, a portion of it needs to be in the stock market and the rest in bonds and cd's.
 
steelcitiesgray said:
If you have a balanced portfolio there is no reason to be jumping in and out of the stock market. You lose money buying and selling your positions and lose money trying to decide when to get back in and miss some or all of the upside. Even with the down turn in 2008-9, it only took my portfolio 1 1/2 years to recover.

Quote "People old enough to be on a senior forum probably are not looking to invest for the long term" Long term is any investment held over a year so I hope that seniors can manage to hang on for that time period.:D People are living longer in retirement. Even if you retire in your 60's you still have 10, 20, 30 years until you meet your maker. That seems pretty long term to me. Seriously, if you have money to invest in your retirement, a portion of it needs to be in the stock market and the rest in bonds and cd's.
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How much is the question. Very much dependent on age and how much a person has in savings. If a person has 'won' the game, why invest much if any in the stock market? And if I were in my mid 80's, I would have very little in the market. Lot's of factors to be considered. No one formula fits all.
 
My investment advisor Tweeted out the following the other day (they are taking a very cautious approach in the current environment), in response to a CNBC report:
The S&P 500 has traded in a mere 1.6 percent range in the month of January through Monday's open. If the month were to end now, that would make January the month with the narrowest range since 1965, according to Oppenheimer.

In November 1965, the S&P traded in just a 1.1 percent range from its high to its low. Actually, the market enjoyed several months around then — March 1965, October 1964, May 1964, and February 1964 — when the then-relatively new index traded in a band of up to 1.6 percent.


In more recent times, the S&P traded in a 2.1 percent range in August 2016, which was the tightest range seen since December 1993.


This time, the top end of the range marks the market's all-time high, hit on Jan. 6. Its January nadir was hit on the first day of the year


The stock stasis didn't start when the calendar turned, to be sure. It has also been noted that the S&P hasn't closed lower by at least 1 percent since Oct. 11.


Some see the muted nature of the S&P's moves as a cause for concern.
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So, my investment advisor noted that they failed to mention this bit of history as a part of their report, thus justifying their current caution:

Tweet 1 of 2: The S&P 500 is on course to do something it hasn’t in 52 years http://cnb.cx/2jNrZ5L What they don't mention is...Tweet 2 of 2: ...the last time it did this the market began a 24% slide within 2 months.
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how you allocate is really not age dependent . how you allocate is based on how much you hope to draw from your portfolio , your investing pucker factor as well as who you are investing for , is it your income or do you have a pension and are investing for legacy money .

age really does not come in to play . do you know even if you were 100% equity's and spent down in good and bad markets you would have been just fine over almost every rolling 30 year period since 1926 . that includes all the worst possible scenario's .

not using 100% equity is more a mental thing . now on the other hand 4% inflation adjusted from 100% fixed income failed to last so many times that it is literally very high risk. on the other hand a 2% inflation adjusted draw from 100% fixed income was just fine .

personally i use 40% equity's along with other asset classes
 
mathjak107 said:
how you allocate is really not age dependent . how you allocate is based on how much you hope to draw from your portfolio , your investing pucker factor as well as who you are investing for , is it your income or do you have a pension and are investing for legacy money .
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Age and pucker factor goes hand in hand for most. My philosophy is why risk it in stocks if you don't have to when you are older. And I'm not worried about leaving money for a legacy.....no children. Again....no one formula works for all.
 
depending on your draw rate you may have to go higher equity allocations .. as i said if you need 4% inflation adjusted then you need at least 35-40% equity . trying to do it with less becomes riskier and riskier the more you go fixed income . 100% fixed income should never be used for A 4% inflation draw rate .

you only won the game when the draw rate meets the allocation with the lowest risk you can actually get by at. i am comfortable up to 50% equity . currently at 40%
 
I think the Trump "Euphoria" in the markets will be short lived. I will be surprised if it lasts for more than another month or two. A pullback of 5%, or more, is quite likely by early Spring as more rational thinking prevails. A portfolio of conservative and dividend paying stocks will probably fare the best....at least, I hope so.
 
i diversified in to not only equity's but long term treasury bonds and gold to fly fighter cover . i will give up some up side profits to be able to continue profiting on the downside . onc we risk is off again gold or long term tresury's usually get the outflow of money from stocks .

but you need opposing assets with enough ooomph to lift the portfolio . a total bond fund can't do that . it may mitigate a bit but it does not have the lifting power compared to long term treasury's and or gold .
 
I agree we are ready for a pullback at any time.

The piece of conventional wisdom that I have trouble with is the idea that you should reduce the percentage of your portfolio in stocks as you age. In my mind the older you get the bolder you can become because your portfolio will need to support you for a shorter period of time. IMO the additional risk won't have much impact on me when I get up into my 90's but it might benefit the folks in my will. What am I missing?
 
there is a new wave of thinking in modern retirement planning .

the idea being promoted today is called a rising glide path .

basically you reduce equity down from what it was in your accumulation stage to about 35% or so .

that protects you from the only danger point which is getting hit early on in an extended downturn . that can be the most harmful since you have not had an up cycle yet in retirement developing a cushion .

you can then increase equity's by 2% a year eventually reaching the max you are comfortable with .

each one of us is unique in what we do .

some folks delay social security so they can be less dependent on markets and can cut equity allocations as they age .

i know if i delay we will fall from a 3.50% draw now to a 2.50% draw . i can cut allocations to equity way down and have a high success rate delaying .

or i can keep the allocations higher and try to refill what we spent down delaying .

it is ultimately all about your personal plan and draw rate .
 
mathjak107 said:
there is a new wave of thinking in modern retirement planning .

the idea being promoted today is called a rising glide path .

basically you reduce equity down from what it was in your accumulation stage to about 35% or so .

that protects you from the only danger point which is getting hit early on in an extended downturn . that can be the most harmful since you have not had an up cycle yet in retirement developing a cushion .

you can then increase equity's by 2% a year eventually reaching the max you are comfortable with .
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Interesting, Thanks!

In my case I've not reduced my equity position in early retirement, I've kept my draw under 2% with the idea that the low initial draw will help to create a cushion.
 
here is a nice chart showing success rates vs allocations . 90% is the minimum success rate considered safe .

i-SSMXJ5L.jpg
 
Aunt Bea said:
I agree we are ready for a pullback at any time.

The piece of conventional wisdom that I have trouble with is the idea that you should reduce the percentage of your portfolio in stocks as you age. In my mind the older you get the bolder you can become because your portfolio will need to support you for a shorter period of time. IMO the additional risk won't have much impact on me when I get up into my 90's but it might benefit the folks in my will. What am I missing?
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If you can sleep with it.....nothing. I like to sleep well.

mathjak107 said:
2% is very small . likely no equity's are even needed to maintain 2% inflation adjusted .
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Now we're on the same page. I'm starting SS next month and my w/d rate will drop to about 1.25%. Therefore I don't have a lot in stocks. Not the way Aunt Bea looks at it, but I'm a low pucker factor kind of guy. We're all different.
 
that is one of the nice things delaying ss gives you . the 70% bigger check plus cola's gives you an option to either cut withdrawals and allocations to equity's down . or it gives you the option to keep the allocations steady and just grow the money with higher equity allocations and refill what you layed out to delay .
 
Aunt Bea said:
I agree we are ready for a pullback at any time.

The piece of conventional wisdom that I have trouble with is the idea that you should reduce the percentage of your portfolio in stocks as you age. In my mind the older you get the bolder you can become because your portfolio will need to support you for a shorter period of time. IMO the additional risk won't have much impact on me when I get up into my 90's but it might benefit the folks in my will. What am I missing?
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the problem with the go even more aggressive as you age is there is a tipping point because you have less time to recover . as we reach older ages spending on healthcare tends to ramp up . last thing you want is a serious downturn reducing your balance by 20% as spending ramps up . it can be a non event like 2008 if recovery is v-shaped and quick as it was in 2008 . but if recovery is slower and more u-shaped it can hurt you bad .

usually by our older ages more money is not going to change a thing in our lives , but a big drop may very well change things .

every time we have a downturn there are seniors who kept the carrot on the stick for to long and regret it . so i find you need a safe comfortable level of allocation or portfolio strategy to smooth out the peaks and valleys . you can end up very close to the same points but depending on your portfolio construction you can have a smooth ride or one hell of a ride to get to about the same spot .

there are portfolio's that have had a fraction of the swings of more aggressive models that produced not only better returns but had far less swings and losing years .

you can see some of the most popular ones here , personally i use the golden butterfly and am test driving it now with substantial dollars .

https://portfoliocharts.com/portfolios/
 
mathjak107 said:
the problem with the go even more aggressive as you age is there is a tipping point because you have less time to recover . as we reach older ages spending on healthcare tends to ramp up . last thing you want is a serious downturn reducing your balance by 20% as spending ramps up . it can be a non event like 2008 if recovery is v-shaped and quick as it was in 2008 . but if recovery is slower and more u-shaped it can hurt you bad .

usually by our older ages more money is not going to change a thing in our lives , but a big drop may very well change things .

every time we have a downturn there are seniors who kept the carrot on the stick for to long and regret it . so i find you need a safe comfortable level of allocation or portfolio strategy to smooth out the peaks and valleys . you can end up very close to the same points but depending on your portfolio construction you can have a smooth ride or one hell of a ride to get to about the same spot .

there are portfolio's that have had a fraction of the swings of more aggressive models that produced not only better returns but had far less swings and losing years .

you can see some of the most popular ones here , personally i use the golden butterfly and am test driving it now with substantial dollars .

https://portfoliocharts.com/portfolios/
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I understand your point.

It will be different for each person depending on what they have and what they need. The key thing is that each person needs to understand the options and develop a plan for themselves and their situation.
 
the biggest problem is few folks really have a good enough understanding of retirement planning to make some of the choices they do . there are so many bits and pieces that all link and tie in and have ramifications elsewhere .

even the classic 60/40 mix which is say 60% total market fund and 40% total bond fund has had huge swings that scare them out of the portfolio's at the worst times .
with a bit of knowledge you can do better with 40% equity's and other investments that go with it , have smaller swings and less losing years and get a higher return .
 
Ironically I was waiting for the day it passed 20,000 but didn't even see the news or check the financials that day. I wonder too how long the rally will last. The market certainly did the opposite of what some financial analysts predicted.
 

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