Author Topic: A watched pot never boils. Stocks, Index Funds, ETFs and Retirement Plans  (Read 10658 times)

norcalmike

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This must be true.
Last year, I started contributing to my 457 plan. Doing about 12k/yr now. I will max out on my next raise in Sept.
I never look at it. I dont know what I am doing so I picked a 2030 target fund and forgot about it.
I started experimenting with stocks earlier this year too. I bought $1000 in GE stock. No particular reason why, it just seemed safe.
I would check it daily and watched it lose value from the day I bought it. So I sold it (I know now that was dumb)
Recently opened a Vanguard ETF. The day after, it starts losing money!!! AAHHH
So im going to stop looking and spend more time researching diversification and holding for the long term.

I feel silly posting my tiny savings and investments here on a page full of millionaires buy I guess you have to start somewhere
« Last Edit: July 25, 2015, 12:25:34 PM by norcalmike »

forummm

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Re: A watched pot never boils
« Reply #1 on: July 25, 2015, 06:08:10 AM »
Most of us aren't millionaires (yet). I agree that you shouldn't watch you balances. Just be invested in broadly diversified low-lost index funds, and keep buying every paycheck, and do that until you retire. The Vanguard Target Retirement Fund for the year you turn 65 is a great choice. Just keep plowing all your money into it. As much as you can buy. By 2030, there will be a lot in there.

spokey doke

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Re: A watched pot never boils
« Reply #2 on: July 25, 2015, 08:18:30 AM »
Watching the market this year, no boiling in sight, not even any hint of steam
« Last Edit: July 25, 2015, 08:20:55 AM by spokey doke »

bzzzt

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Re: A watched pot never boils
« Reply #3 on: July 25, 2015, 09:22:19 AM »
I wish I would quit looking. More so, I wish I had moved everything over to index funds when I discovered MMM. The 20%+ gains I saw last year have evaporated and I'm probably down money with the taxes I paid on last year's gains...

norcalmike

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Re: A watched pot never boils
« Reply #4 on: July 25, 2015, 09:38:26 AM »
I wish I would quit looking. More so, I wish I had moved everything over to index funds when I discovered MMM. The 20%+ gains I saw last year have evaporated and I'm probably down money with the taxes I paid on last year's gains...

My #1 priority is making sure i pick the right funds in my 457. No matter what, 18k per year is going into it for the pre tax benefits.
I want to split the investment into other funds other than the target funds so I can be diverse.
I started the Vanguard and Etrade account with $1000 each just to start something so I can earn and experiment.
The majority of my surplus post tax income is going toward cash savings and paying off my student loans first.

a1smith

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Re: A watched pot never boils
« Reply #5 on: July 25, 2015, 10:13:40 AM »
. . . . .
Recently opened a Vanguard ETF. The day after, it starts losing money!!! AAHHH
So im going to stop looking and spend more time researching diversification and holding for the long term.

I feel silly posting my tiny savings and investments here on a page full of millionaires buy I guess you have to start somewhere

I just opened a new Vanguard after-tax account on 7/21 and it has already gone down 1.2%.  I'm not worried about it.  Just get your AA the way you want it and leave it there.  I'm using Vanguard total stock and bond index funds, US and intl flavor for both.  Rebalance every now & then; once a year is fine.  I even saw an interview with John Bogle and he said he had not rebalanced for a few years; he was letting his winners run (uh oh, was he timing the market????  :-D).  Some people rebalance when one holding gets a set % from target.

As forummm mentioned, you can use Vanguard Target Retirement 2030 fund (VTHRX) for your after-tax account.  For VTHRX, you have $1000 minimum and 0.17% ER.

One way to save money on ER is to use the individual funds and allocate yourself; just copy the AA for the Target Date fund posted on the website.  As long as one fund is Admiral you save on the ER.  For VTHRX, VTSAX is 48.4% so you reach $10k in VTSAX at $20,661 total.  Then, your ER would be 0.13% instead of 0.17%.  Once you get to all Admiral funds the ER is 0.087%, more than 8 basis points lower.  You can slowly build your position using Investor class funds to start; you don't even have to buy all 4 initially.  You could start with Total Stock Index or Total Bond Index, whichever you are most comfortable with.  A little more work up front but the lower ER is worth it, especially when your balances are much higher later on.

norcalmike

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Re: A watched pot never boils
« Reply #6 on: July 25, 2015, 10:21:33 AM »

As forummm mentioned, you can use Vanguard Target Retirement 2030 fund (VTHRX) for your after-tax account.  For VTHRX, you have $1000 minimum and 0.17% ER.

One way to save money on ER is to use the individual funds and allocate yourself; just copy the AA for the Target Date fund posted on the website.  As long as one fund is Admiral you save on the ER.  For VTHRX, VTSAX is 48.4% so you reach $10k in VTSAX at $20,661 total.  Then, your ER would be 0.13% instead of 0.17%.  Once you get to all Admiral funds the ER is 0.087%, more than 8 basis points lower.  You can slowly build your position using Investor class funds to start; you don't even have to buy all 4 initially.  You could start with Total Stock Index or Total Bond Index, whichever you are most comfortable with.  A little more work up front but the lower ER is worth it, especially when your balances are much higher later on.

I have the 457 in a 2030 target fund.
The after-tax is VTI
Im guessing here but looking forward to learning more
Thanks for the help

forummm

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Re: A watched pot never boils
« Reply #7 on: July 25, 2015, 10:32:41 AM »
As forummm mentioned, you can use Vanguard Target Retirement 2030 fund (VTHRX) for your after-tax account.  For VTHRX, you have $1000 minimum and 0.17% ER.

Small clarification, I didn't specify 2030--just the fund for the approximate year OP turns 65. OP didn't specify their age.

a1smith

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Re: A watched pot never boils
« Reply #8 on: July 25, 2015, 10:38:42 AM »
As forummm mentioned, you can use Vanguard Target Retirement 2030 fund (VTHRX) for your after-tax account.  For VTHRX, you have $1000 minimum and 0.17% ER.

Small clarification, I didn't specify 2030--just the fund for the approximate year OP turns 65. OP didn't specify their age.

norcalmike mentioned a 2030 target fund for his 457 so I combined your comment and his . . .

norcalmike

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Re: A watched pot never boils
« Reply #9 on: July 25, 2015, 10:40:32 AM »
As forummm mentioned, you can use Vanguard Target Retirement 2030 fund (VTHRX) for your after-tax account.  For VTHRX, you have $1000 minimum and 0.17% ER.

Small clarification, I didn't specify 2030--just the fund for the approximate year OP turns 65. OP didn't specify their age.

I am 42. I am eligible to retire at 50 with a small CalPERS pension and free, retiree health benefits for myself.
Thats the plan. I need to be able to supplement the PERS pension though. At 50 it will be too small to live.
Hence the 457 and after tax investments.
I lost my home in 2009. Im trying to figure out how to own a home outright. I dont think I can buy a house in Santa Cruz. That ship has sailed.
Although, I do have a 6 figure income in the medical field and my wife is in RN school. In 5 years or so, she should have 6 figure income as well so there is a chance for big catchup even though I am starting at a late age.
« Last Edit: July 25, 2015, 10:45:13 AM by norcalmike »

nobodyspecial

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Re: A watched pot never boils
« Reply #10 on: July 25, 2015, 11:50:44 AM »
I wish I would quit looking.
I wish there was a way of buying Vanguard without seeing the current balance.

Ironically it's because the total is up - because of the loonie drop - which means I'm buying expensive US shares with cheap Canadian $.

forummm

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As forummm mentioned, you can use Vanguard Target Retirement 2030 fund (VTHRX) for your after-tax account.  For VTHRX, you have $1000 minimum and 0.17% ER.

Small clarification, I didn't specify 2030--just the fund for the approximate year OP turns 65. OP didn't specify their age.

I am 42. I am eligible to retire at 50 with a small CalPERS pension and free, retiree health benefits for myself.
Thats the plan. I need to be able to supplement the PERS pension though. At 50 it will be too small to live.
Hence the 457 and after tax investments.
I lost my home in 2009. Im trying to figure out how to own a home outright. I dont think I can buy a house in Santa Cruz. That ship has sailed.
Although, I do have a 6 figure income in the medical field and my wife is in RN school. In 5 years or so, she should have 6 figure income as well so there is a chance for big catchup even though I am starting at a late age.


I suggested the year you turn 65 (so the 2040 fund) because the fund gets more and more conservative over time. You'll ideally need the money to last for quite awhile. So having a slightly higher percent of equities will help you have enough growth to last for a longer retirement period. The 2040 fund gradually hits 70% bonds in 2047 and stays at 70% bonds forever after that. If you go with the 2030 fund, you'll probably have to take out less from that in order for it to last as long.

a1smith

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Re: A watched pot never boils
« Reply #12 on: July 25, 2015, 05:23:23 PM »
I wish I would quit looking.
I wish there was a way of buying Vanguard without seeing the current balance.

Ironically it's because the total is up - because of the loonie drop - which means I'm buying expensive US shares with cheap Canadian $.

Set up auto invest and only log in to the website once a year to rebalance.

forummm

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I wish I would quit looking.
I wish there was a way of buying Vanguard without seeing the current balance.

Ironically it's because the total is up - because of the loonie drop - which means I'm buying expensive US shares with cheap Canadian $.

Set up auto invest and only log in to the website once a year to rebalance.

Can Canadians do auto-investing? They may be stuck with just ETFs.

nobodyspecial

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I think the difference is that you can't buy direct with Vanguard canada -  you need an online broker account.

Yankuba

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When you're young the balance always goes up because your periodic contributions as a percentage of your portfolio are large. When you pass $500k or $1mil your $1000 contributions appear insignificant and the market movements determine your balance.

a1smith

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I wish I would quit looking.
I wish there was a way of buying Vanguard without seeing the current balance.

Ironically it's because the total is up - because of the loonie drop - which means I'm buying expensive US shares with cheap Canadian $.

Set up auto invest and only log in to the website once a year to rebalance.

Can Canadians do auto-investing? They may be stuck with just ETFs.

Yes, only ETF's.  See https://www.vanguardcanada.ca/individual/portal.htm.  I should have remembered, my wife is Canadian!  ;-)

ozbeach

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Re: A watched pot never boils
« Reply #17 on: July 25, 2015, 11:31:50 PM »
I wish I would quit looking. More so, I wish I had moved everything over to index funds when I discovered MMM. The 20%+ gains I saw last year have evaporated and I'm probably down money with the taxes I paid on last year's gains...

Do you have to pay tax on gains that you haven't yet realised? Here in Australia we pay tax on capital gains, but only when we sell and realise the gain (or loss - you can carry those forward for tax purposes).

norcalmike

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As forummm mentioned, you can use Vanguard Target Retirement 2030 fund (VTHRX) for your after-tax account.  For VTHRX, you have $1000 minimum and 0.17% ER.

Small clarification, I didn't specify 2030--just the fund for the approximate year OP turns 65. OP didn't specify their age.

I am 42. I am eligible to retire at 50 with a small CalPERS pension and free, retiree health benefits for myself.
Thats the plan. I need to be able to supplement the PERS pension though. At 50 it will be too small to live.
Hence the 457 and after tax investments.
I lost my home in 2009. Im trying to figure out how to own a home outright. I dont think I can buy a house in Santa Cruz. That ship has sailed.
Although, I do have a 6 figure income in the medical field and my wife is in RN school. In 5 years or so, she should have 6 figure income as well so there is a chance for big catchup even though I am starting at a late age.


I suggested the year you turn 65 (so the 2040 fund) because the fund gets more and more conservative over time. You'll ideally need the money to last for quite awhile. So having a slightly higher percent of equities will help you have enough growth to last for a longer retirement period. The 2040 fund gradually hits 70% bonds in 2047 and stays at 70% bonds forever after that. If you go with the 2030 fund, you'll probably have to take out less from that in order for it to last as long.

Thank you for that. These are the strategies I am trying to learn.
I appreciate everyone engaging in the discussion. This is just what I need.

forummm

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Can Canadians do auto-investing? They may be stuck with just ETFs.

Yes, only ETF's.  See https://www.vanguardcanada.ca/individual/portal.htm.  I should have remembered, my wife is Canadian!  ;-)

At least you only forgot her birth citizenship, and not something serious like your anniversary! :)

fb132

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Re: A watched pot never boils
« Reply #20 on: July 26, 2015, 08:13:12 AM »
. . . . .
Recently opened a Vanguard ETF. The day after, it starts losing money!!! AAHHH
So im going to stop looking and spend more time researching diversification and holding for the long term.

I feel silly posting my tiny savings and investments here on a page full of millionaires buy I guess you have to start somewhere

I just opened a new Vanguard after-tax account on 7/21 and it has already gone down 1.2%.  I'm not worried about it.  Just get your AA the way you want it and leave it there.  I'm using Vanguard total stock and bond index funds, US and intl flavor for both.  Rebalance every now & then; once a year is fine.  I even saw an interview with John Bogle and he said he had not rebalanced for a few years; he was letting his winners run (uh oh, was he timing the market????  :-D).  Some people rebalance when one holding gets a set % from target.

As forummm mentioned, you can use Vanguard Target Retirement 2030 fund (VTHRX) for your after-tax account.  For VTHRX, you have $1000 minimum and 0.17% ER.

One way to save money on ER is to use the individual funds and allocate yourself; just copy the AA for the Target Date fund posted on the website.  As long as one fund is Admiral you save on the ER.  For VTHRX, VTSAX is 48.4% so you reach $10k in VTSAX at $20,661 total.  Then, your ER would be 0.13% instead of 0.17%.  Once you get to all Admiral funds the ER is 0.087%, more than 8 basis points lower.  You can slowly build your position using Investor class funds to start; you don't even have to buy all 4 initially.  You could start with Total Stock Index or Total Bond Index, whichever you are most comfortable with.  A little more work up front but the lower ER is worth it, especially when your balances are much higher later on.
Yea this year's market sucks, I rebalance my portolio only when one of my ETF's strays off 5% from their original allocation and I only rebalance once a calendar year, so if this year for exampe VCN (which is 30%) drops to 25%, I will rebalance it back at 30%...if it still drops again by 5% during the full year, then i won't touch it again until 2016.

nobodyspecial

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Remember that (unless things go crazy) re-balancing while you are still saving just means buy more of the lowest performing (and hence cheapest) fund in your portfolio - you don't have to sell the biggest one.

ender

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Point to consider: if you plan on buying stocks regularly over next 10 years, do you want prices to look like over that time:


Quote
$1, $2, $3, $5, $4, $6, $5, $7, $9

or

Quote
$1 $0.5 $.75 $1 $2 $1.5 $2 $5 $9


Obviously you cannot decide which it is, but you can pretty easily gather that the latter, even though perhaps emotionally difficult, is better for you - the buyer - long term.

The first would feel really great in the short term but be worse for you long term. However emotionally the second feels awful (even as a buyer) and the first feels great.


EricL

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"A watched pot never boils" is a good anology. But a watched stock portfolio seems to be worse in a way. A watched portfolio encourages exasperation, speculation, freak outs when the market drops and over confidence when it booms.  In my (admittedly anecdotal, unscientific) experience, the markets work in large and small cycles of 3 steps forward, 2 steps back.

That's not to say you shouldn't examine your investments to make sure they're still worthwhile from time to time.  A solid company is a keeper even in a down market; one that turns bad a liability even in an up market. Examining them regularly to know the difference is prudent.

Regardless, two epiphanies will occur to new investors eventually. The first is when the market hiccups up 1% in a day and their investments are such they make as much in that day as the monthly wage of their very first job. :) The second is when the market nose dives then recovers. Hopefully they'll be the ones who didn't sell at the bottom and better yet piled on in the recovery.

ender

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"A watched pot never boils" is a good anology. But a watched stock portfolio seems to be worse in a way. A watched portfolio encourages exasperation, speculation, freak outs when the market drops and over confidence when it booms.  In my (admittedly anecdotal, unscientific) experience, the markets work in large and small cycles of 3 steps forward, 2 steps back.

It's funny, this thread made me login to Mint and check our net worth - apparently we lost quite a bit the past few days and our net worth's first digit went back down again.

.... but I didn't notice till this thread :)

Seppia

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A watched pot never boils. Stocks, Index Funds, ETFs and Retirement Plans
« Reply #25 on: July 26, 2015, 03:33:22 PM »
So true!
I have been extremely lucky and started investing relatively early back in 2005 (I was 25 at the time), but unfortunately I wasn't making that much money when the big financial crisis hit, plus I was still ridiculously conservative and kept almost 50% in cash, minimizing future gains. I still did great obviously, as anybody would have within this period of time.
So now after a little experience, I am among those who are sad the market is so high, because I am making more money now than I was at the time.
I think there are still some relative bargains around, right now I am very much overweight in the energy sector, with a mix of funds (vanguard energy) and stocks (Exxon and Royal Ducth) for example, and I am purchasing more international stocks (through vanguard) than U.S. stocks because the P/E is much lower.
Still, I would like the market to finally go down a bit here in the U.S.

a1smith

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Point to consider: if you plan on buying stocks regularly over next 10 years, do you want prices to look like over that time:


Quote
$1, $2, $3, $5, $4, $6, $5, $7, $9

or

Quote
$1 $0.5 $.75 $1 $2 $1.5 $2 $5 $9


Obviously you cannot decide which it is, but you can pretty easily gather that the latter, even though perhaps emotionally difficult, is better for you - the buyer - long term.

The first would feel really great in the short term but be worse for you long term. However emotionally the second feels awful (even as a buyer) and the first feels great.

But the person that retires when it is $0.50 won't be very happy - sequence of returns risk. DCA only works if the final value is greater than your average cost.

ender

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DCA only works if the final value is greater than your average cost.

Which, all of us who invest in anything other than cash/money market accounts clearly do ;)

forummm

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Point to consider: if you plan on buying stocks regularly over next 10 years, do you want prices to look like over that time:


Quote
$1, $2, $3, $5, $4, $6, $5, $7, $9

or

Quote
$1 $0.5 $.75 $1 $2 $1.5 $2 $5 $9


Obviously you cannot decide which it is, but you can pretty easily gather that the latter, even though perhaps emotionally difficult, is better for you - the buyer - long term.

The first would feel really great in the short term but be worse for you long term. However emotionally the second feels awful (even as a buyer) and the first feels great.

But the person that retires when it is $0.50 won't be very happy - sequence of returns risk. DCA only works if the final value is greater than your average cost.

With a 4% WR, that person would still be OK. They'd actually be insanely rich.

a1smith

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Point to consider: if you plan on buying stocks regularly over next 10 years, do you want prices to look like over that time:


Quote
$1, $2, $3, $5, $4, $6, $5, $7, $9

or

Quote
$1 $0.5 $.75 $1 $2 $1.5 $2 $5 $9


Obviously you cannot decide which it is, but you can pretty easily gather that the latter, even though perhaps emotionally difficult, is better for you - the buyer - long term.

The first would feel really great in the short term but be worse for you long term. However emotionally the second feels awful (even as a buyer) and the first feels great.

But the person that retires when it is $0.50 won't be very happy - sequence of returns risk. DCA only works if the final value is greater than your average cost.

With a 4% WR, that person would still be OK. They'd actually be insanely rich.

When the market goes up 6X in 3 years we'll all be insanely rich as long as we cash out before everything comes crashing down.

forummm

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Point to consider: if you plan on buying stocks regularly over next 10 years, do you want prices to look like over that time:


Quote
$1, $2, $3, $5, $4, $6, $5, $7, $9

or

Quote
$1 $0.5 $.75 $1 $2 $1.5 $2 $5 $9


Obviously you cannot decide which it is, but you can pretty easily gather that the latter, even though perhaps emotionally difficult, is better for you - the buyer - long term.

The first would feel really great in the short term but be worse for you long term. However emotionally the second feels awful (even as a buyer) and the first feels great.

But the person that retires when it is $0.50 won't be very happy - sequence of returns risk. DCA only works if the final value is greater than your average cost.

With a 4% WR, that person would still be OK. They'd actually be insanely rich.

When the market goes up 6X in 3 years we'll all be insanely rich as long as we cash out before everything comes crashing down.

? You just said the person would be unhappy.

I don't see a difference in the 2 scenarios. They both look equally valued in year 1 and year 9. The CAGR is the same.

a1smith

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Point to consider: if you plan on buying stocks regularly over next 10 years, do you want prices to look like over that time:


Quote
$1, $2, $3, $5, $4, $6, $5, $7, $9

or

Quote
$1 $0.5 $.75 $1 $2 $1.5 $2 $5 $9


Obviously you cannot decide which it is, but you can pretty easily gather that the latter, even though perhaps emotionally difficult, is better for you - the buyer - long term.

The first would feel really great in the short term but be worse for you long term. However emotionally the second feels awful (even as a buyer) and the first feels great.

But the person that retires when it is $0.50 won't be very happy - sequence of returns risk. DCA only works if the final value is greater than your average cost.

With a 4% WR, that person would still be OK. They'd actually be insanely rich.

When the market goes up 6X in 3 years we'll all be insanely rich as long as we cash out before everything comes crashing down.

? You just said the person would be unhappy.

I don't see a difference in the 2 scenarios. They both look equally valued in year 1 and year 9. The CAGR is the same.

CAGR is the same only if you make one lump sum investment in year 1.  Since this scenario is for regular investments each year the CAGR is not the same.  This is the reason most people's returns don't match what their mutual funds publish.

For the linearly increasing price series, a regular $100 investment in years 1-8 and then sell in year 9 yields 25% CAGR.  For the other price history, same scenario gives you 47% CAGR.

On the other hand, for someone that is retiring starting with an initial balance and 4% WR the linear series yields 28% return and other yields 25% return, only saved by the ridiculous 6X increase in the last 3 years.

I understand the point of the two price series; it is just illustrating a lower average cost is better for DCA with same final price.

For the retiree with the non-linear price series I'm sure they won't be happy when they see their balance at 44% starting value after price decrease and 2 yearly withdrawals.  Since they don't have a crystal ball and don't know that a 6X market increase is coming to save them they become the greeter at Wal-mart for three years!  Very unhappy.

My second comment was just poking fun at the 6X increase in 3 years.  If that happens in the next 3 years I will retire with <1% WR!  :-)  With that much safety margin there is no need to assume much, if any, risk in the market; I would switch to capital preservation mode.

Wolf359

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I watch my balance daily.  I shouldn't, but I can't help it.   Here's what helps for me:

1) Change your mindset. If you were stockpiling socks, not stocks, you would want the price while you're buying them to be as low as possible.  Try to think of them as socks, not stocks.  You're buying a commodity for the future.  The lower the price you pay per unit, the better.  Just keep buying them as the price drops.  (This works best on index funds that will recover in time.)

2) Change your timeframe.  Look at the charts on the 10 year timeframe or higher, only.  All the short-term noise washes out. The long-term trend is easier to take.  If I'm trying to invest on a long-term cycle, pay attention to that longer-term chart.

3)  Change your metric. Track your total number of shares, not just the price.  Remember, the more shares, the better.  The lower the price goes (if you're dollar cost averaging), the faster the shares accumulate.  If you stay the course and buy while the price is down, at some point in the future, you will be very, very happy. The pot is boiling.  The number you want climbing is the number of shares owned.

4)  Set a goal for which the balance is irrelevant.  I've got my budget pushed to the point where we can meet our contribution numbers if we concentrate, but not if we spend willy-nilly.  My goal is to keep the budget balanced and meet every contribution target this year.  The only number that counts is that my contributed balance keeps climbing, and was on target in each pay period. 

5) Predetermine your decision.  Never sell in taxable.  To buy in taxable is to hold it until retirement.  If you have to rebalance, do that in the tax-deferred accounts.  If I can get away with it, my ideal holding period is forever.  Once you accept that, the decision is made.  No sales.  No panics.  Prices dropping is part of the plan, because they have years to recover.  If the FIRE plan doesn't work, it will still come close.  I'll just work a few more years.  I'll still be able to FIRE way before 65.  By the way, this really works.  Most people don't panic sell in their 401K retirement accounts.  Generally they ignore them.  They'll worry about it when they retire.  Selling in taxable results in tax consequences.  Therefore, don't sell.

6) Validate your strategy in portfolio visualizer.  If it handled the worst situations that have occurred so far, it has a fair chance of handling future bad markets.  Then I'm watching it play out. 


eyesonthehorizon

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I watch my balance daily.  I shouldn't, but I can't help it.   Here's what helps for me:
[awesome summary of personal habits]
I'm just really relieved that there are other people out there who are hypervigilant but make up for it in willpower, the way I do - reading a lot of PF blogs and general frugalist/ FIRE writers, their control tactics are more to do with "what you don't see you can't worry about," which is the opposite of the way I function. If I'm not thinking about it, ANYTHING COULD HAPPEN. The fear's irrational but it's there. Instead I have to rely on willpower to not make decisions I already know are dumb, and reframing a worrying circumstance in a way that's both more rational and more optimistic is a necessity and challenge for me - #1, 3 and 4 all hinge on specifically reframing an anxiety trigger as a natural and expected situation in a way I still struggle with some days, so thanks for laying it out so clearly. (I love the socks idea.)

sheepstache

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Can't believe no one has made a stockpot joke yet.

forummm

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Can't believe no one has made a stockpot joke yet.

Well then there's nothing stopping you. Let me hear a good one.

okits

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I watch my balance daily.  I shouldn't, but I can't help it.   Here's what helps for me:

1) Change your mindset. If you were stockpiling socks, not stocks, you would want the price while you're buying them to be as low as possible.  Try to think of them as socks, not stocks.  You're buying a commodity for the future.  The lower the price you pay per unit, the better.  Just keep buying them as the price drops.  (This works best on index funds that will recover in time.)

2) Change your timeframe.  Look at the charts on the 10 year timeframe or higher, only.  All the short-term noise washes out. The long-term trend is easier to take.  If I'm trying to invest on a long-term cycle, pay attention to that longer-term chart.

3)  Change your metric. Track your total number of shares, not just the price.  Remember, the more shares, the better.  The lower the price goes (if you're dollar cost averaging), the faster the shares accumulate.  If you stay the course and buy while the price is down, at some point in the future, you will be very, very happy. The pot is boiling.  The number you want climbing is the number of shares owned.

4)  Set a goal for which the balance is irrelevant.  I've got my budget pushed to the point where we can meet our contribution numbers if we concentrate, but not if we spend willy-nilly.  My goal is to keep the budget balanced and meet every contribution target this year.  The only number that counts is that my contributed balance keeps climbing, and was on target in each pay period. 

5) Predetermine your decision.  Never sell in taxable.  To buy in taxable is to hold it until retirement.  If you have to rebalance, do that in the tax-deferred accounts.  If I can get away with it, my ideal holding period is forever.  Once you accept that, the decision is made.  No sales.  No panics.  Prices dropping is part of the plan, because they have years to recover.  If the FIRE plan doesn't work, it will still come close.  I'll just work a few more years.  I'll still be able to FIRE way before 65.  By the way, this really works.  Most people don't panic sell in their 401K retirement accounts.  Generally they ignore them.  They'll worry about it when they retire.  Selling in taxable results in tax consequences.  Therefore, don't sell.

6) Validate your strategy in portfolio visualizer.  If it handled the worst situations that have occurred so far, it has a fair chance of handling future bad markets.  Then I'm watching it play out.

That list was fantastic, thank you Wolf359!  I watch daily, too, out of curiosity.  Though it's a temporary state of affairs, I like knowing if my portfolio is up/down each day, and by how much.  It is also interesting to observe the negative correlations (when they work, when they don't seem to!)

Wolf359

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Can't believe no one has made a stockpot joke yet.

Well then there's nothing stopping you. Let me hear a good one.
Dang it!  Who put the socks in my stockpot?!

...It's never going to boil now...

Kaspian

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I started experimenting with stocks earlier this year too. I bought $1000 in GE stock. No particular reason why, it just seemed safe.
I would check it daily and watched it lose value from the day I bought it. So I sold it (I know now that was dumb)

You bought $1000 worth of stock and sold it because of it's performance within a (less than?)  6-month timeframe?  :O

Got news for you my friend--stocks, markets, and indexes go up and down.  The general trend is up over years and years.  Judging an investment over the course of a few months is definitely a bad idea.

I have a feeling a lot of new investors who think everything always goes up are going to be pulling out of investing when we hit a year or longer bear market.  :(   ...But I guess that's just the standard historically cyclical investor story.

Rollin

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Re: A watched pot never boils
« Reply #39 on: July 29, 2015, 12:19:18 PM »

As forummm mentioned, you can use Vanguard Target Retirement 2030 fund (VTHRX) for your after-tax account.  For VTHRX, you have $1000 minimum and 0.17% ER.

One way to save money on ER is to use the individual funds and allocate yourself; just copy the AA for the Target Date fund posted on the website.  As long as one fund is Admiral you save on the ER.  For VTHRX, VTSAX is 48.4% so you reach $10k in VTSAX at $20,661 total.  Then, your ER would be 0.13% instead of 0.17%.  Once you get to all Admiral funds the ER is 0.087%, more than 8 basis points lower.  You can slowly build your position using Investor class funds to start; you don't even have to buy all 4 initially.  You could start with Total Stock Index or Total Bond Index, whichever you are most comfortable with.  A little more work up front but the lower ER is worth it, especially when your balances are much higher later on.

I have the 457 in a 2030 target fund.
The after-tax is VTI
Im guessing here but looking forward to learning more
Thanks for the help

Check the fees associated with that one, as they are a bit higher than I like in my 457K and might assume in yours as well.

norcalmike

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I met with the adviser hired by the county to help us with our ICMA-RC 457. He had much of the same advice learned here. Just set it and forget it unless you feel informed enough and disciplined to self manage.
I did increase my contributions from 10% to 15% today that will have me at 18k per year by around oct/nov every year. YEAH!!
I reallocated my funds to be 45% Target 2040, 40 % Vanguard Institutional Index and 15% Vanguard REIT Index.
Why did I pick those? I dont really know but im gonna leave them be and keep pouring pre-tax money into them.


nobodyspecial

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I bought $1000 in GE stock. No particular reason why, it just seemed safe.

You bought $1000 worth of stock and sold it because of it's performance within a (less than?)  6-month timeframe?  :O
But it might not be a safe long term stock - I mean if people are going to stop using electricity now that we have wireless...

norcalmike

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  • Posts: 52
  • Location: Santa Cruz , CA
I started experimenting with stocks earlier this year too. I bought $1000 in GE stock. No particular reason why, it just seemed safe.
I would check it daily and watched it lose value from the day I bought it. So I sold it (I know now that was dumb)

You bought $1000 worth of stock and sold it because of it's performance within a (less than?)  6-month timeframe?  :O

Got news for you my friend--stocks, markets, and indexes go up and down.  The general trend is up over years and years.  Judging an investment over the course of a few months is definitely a bad idea.

I have a feeling a lot of new investors who think everything always goes up are going to be pulling out of investing when we hit a year or longer bear market.  :(   ...But I guess that's just the standard historically cyclical investor story.

Like I said, I didnt know what I was doing. I am learning. Thanks

englyn

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I watch my balance daily.  I shouldn't, but I can't help it.   Here's what helps for me:

1) Change your mindset. If you were stockpiling socks, not stocks, you would want the price while you're buying them to be as low as possible.  Try to think of them as socks, not stocks.  You're buying a commodity for the future.  The lower the price you pay per unit, the better.  Just keep buying them as the price drops.  (This works best on index funds that will recover in time.)

2) Change your timeframe.  Look at the charts on the 10 year timeframe or higher, only.  All the short-term noise washes out. The long-term trend is easier to take.  If I'm trying to invest on a long-term cycle, pay attention to that longer-term chart.

3)  Change your metric. Track your total number of shares, not just the price.  Remember, the more shares, the better.  The lower the price goes (if you're dollar cost averaging), the faster the shares accumulate.  If you stay the course and buy while the price is down, at some point in the future, you will be very, very happy. The pot is boiling.  The number you want climbing is the number of shares owned.

4)  Set a goal for which the balance is irrelevant.  I've got my budget pushed to the point where we can meet our contribution numbers if we concentrate, but not if we spend willy-nilly.  My goal is to keep the budget balanced and meet every contribution target this year.  The only number that counts is that my contributed balance keeps climbing, and was on target in each pay period. 

5) Predetermine your decision.  Never sell in taxable.  To buy in taxable is to hold it until retirement.  If you have to rebalance, do that in the tax-deferred accounts.  If I can get away with it, my ideal holding period is forever.  Once you accept that, the decision is made.  No sales.  No panics.  Prices dropping is part of the plan, because they have years to recover.  If the FIRE plan doesn't work, it will still come close.  I'll just work a few more years.  I'll still be able to FIRE way before 65.  By the way, this really works.  Most people don't panic sell in their 401K retirement accounts.  Generally they ignore them.  They'll worry about it when they retire.  Selling in taxable results in tax consequences.  Therefore, don't sell.

6) Validate your strategy in portfolio visualizer.  If it handled the worst situations that have occurred so far, it has a fair chance of handling future bad markets.  Then I'm watching it play out.

Seconding that this is awesome advice!

a1smith

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I bought $1000 in GE stock. No particular reason why, it just seemed safe.

You bought $1000 worth of stock and sold it because of it's performance within a (less than?)  6-month timeframe?  :O
But it might not be a safe long term stock - I mean if people are going to stop using electricity now that we have wireless...

GE is an well diversified company, power generation equipment is only one of their areas.

Also, even if appliances, etc are powered by wireless technology they are still using electrical power; they are just receiving it via inductive coupling.

Seppia

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I suspect there might have been a heavy dose of sarcasm in norcalmike's post :)

a1smith

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I suspect there might have been a heavy dose of sarcasm in norcalmike's post :)

You mean nobodyspecial's post?  Maybe so . . . .

K-ice

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Re: A watched pot never boils
« Reply #47 on: July 29, 2015, 10:44:38 PM »
I wish I would quit looking. More so, I wish I had moved everything over to index funds when I discovered MMM. The 20%+ gains I saw last year have evaporated and I'm probably down money with the taxes I paid on last year's gains...

Dumb question, don't you just pay capital gains tax after you sell stocks?  Dividends are different I know that.

Maybe it's a U.S. Canadian difference.

I see OZbeach had a similar question.
« Last Edit: July 29, 2015, 10:52:14 PM by K-ice »

aspiringnomad

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Re: A watched pot never boils
« Reply #48 on: August 04, 2015, 10:15:41 PM »
I wish I would quit looking. More so, I wish I had moved everything over to index funds when I discovered MMM. The 20%+ gains I saw last year have evaporated and I'm probably down money with the taxes I paid on last year's gains...

Dumb question, don't you just pay capital gains tax after you sell stocks?  Dividends are different I know that.

Maybe it's a U.S. Canadian difference.

I see OZbeach had a similar question.

It's the same here in the US. I'm guessing bzzzt took profits last year.