Author Topic: Target AA once fired  (Read 9696 times)

Interest Compound

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Re: Target AA once fired
« Reply #50 on: December 06, 2016, 03:47:53 PM »
man thats fun... thats what i wanted to see.  and what i wanted this conversation to spark.

standard
2MM
80k annual spend
40 years

so 100% S&P 500 fails 3 times
80smv/20LTT fails 1 time
60smv/20LTT fails 0 times never falls below 2MM and has huge upside.

i guess the question is why arent higher risk investments like this with low risk options proposed more

This is precisely what we've been discussing. I'm repeating myself at this point, but since you're asking the same question...

Because these strategies require predicting future winners. Without knowing the future, this proves to be an incredibly difficult task. Choose wrong, and you're in trouble.

i understand you cant know the future but all we are doing here is basing our investments off what has happened in the past.  even your investments are still based on what happened in the past if the stock markets for the world returned net 0% over the last 100 years you wouldnt have your strategy either. correct?

This is a common investing fallacy. The two comparisons you've made are on different levels. You're missing the competition factor. You can bet on the horse, or you can bet on the race.

Think of it like this. "Why is it wrong for me to bet on the Dallas Cowboys winning the 2020 SuperBowl, when you're betting the NFL is going to continue to exist in 2020?"

It's not perfect, because the NFL competes with other sports too, but it's close enough to get the point across. In order for your Dallas Cowboys bet to pay off, you have to be right twice:

1. The NFL needs to exist.
2. The Dallas Cowboys need to beat all the 30+ other teams and win the SuperBowl.

Now let's apply that to your current question.

"Why is it wrong for me to bet that a specific basket of stocks will beat all the other 30+ baskets of stocks during my retirement, when you're betting that the human race will continue to create and grow companies while producing goods and services that people purchase during your retirement?"

Again, you have to be right twice. I only have to be right once. And the best part? Even if you're right, I win, because I own that basket of stocks too :) But if your Dallas Cowboys bet is wrong...you're in trouble.

boarder42

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Re: Target AA once fired
« Reply #51 on: December 06, 2016, 04:18:53 PM »
yes but you're more heavily weighted in large cap stocks. meaning you have a larger percentage of your eggs in that basket correct

Interest Compound

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Re: Target AA once fired
« Reply #52 on: December 06, 2016, 05:04:15 PM »
yes but you're more heavily weighted in large cap stocks. meaning you have a larger percentage of your eggs in that basket correct

When you buy a cap-weighted index, you aren't making a bet on any one particular sector. You're simply taking the average of all other positions. This guarantees you'll never have a bad year compared to your competition, because you're guaranteed to beat or match at least half of all invested dollars. It's also the cheapest/easiest to maintain, as it auto-rebalances itself (by definition it is always in balance), keeping both taxes and fees low.

Radagast

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Re: Target AA once fired
« Reply #53 on: December 06, 2016, 10:13:25 PM »
A while ago I thought about this and came up with these guidelines:
Not less than 50% should be in stocks
Not more than 50% should be in US Stocks
Not more than 50% should be in International stocks (talking US people here)
Bonds should be at least 10% but not more than 40%

If you make a plan that follows the above and stick to it through thick and thin you have just as good a shot at success as anyone, I would say. Note that the above have been carefully crafted to include my critiques of both the 100% global cap weighted stock portfolio and the golden butterfly portfolio :-). They also include a deliberate shot at Jim Collins' inane recommendations, and allow an implementation of John Bogle's recommended 60/40 portfolio (with 17% of stocks in international) for those so inclined.

arebelspy

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Re: Target AA once fired
« Reply #54 on: December 06, 2016, 11:09:39 PM »
A while ago I thought about this and came up with these guidelines:
Not less than 50% should be in stocks
Not more than 50% should be in US Stocks
Not more than 50% should be in International stocks (talking US people here)
Bonds should be at least 10% but not more than 40%

If you make a plan that follows the above and stick to it through thick and thin you have just as good a shot at success as anyone, I would say. Note that the above have been carefully crafted to include my critiques of both the 100% global cap weighted stock portfolio and the golden butterfly portfolio :-). They also include a deliberate shot at Jim Collins' inane recommendations, and allow an implementation of John Bogle's recommended 60/40 portfolio (with 17% of stocks in international) for those so inclined.

I like it.
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steveo

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Re: Target AA once fired
« Reply #55 on: December 06, 2016, 11:52:56 PM »
A while ago I thought about this and came up with these guidelines:
Not less than 50% should be in stocks
Not more than 50% should be in US Stocks
Not more than 50% should be in International stocks (talking US people here)
Bonds should be at least 10% but not more than 40%

If you make a plan that follows the above and stick to it through thick and thin you have just as good a shot at success as anyone, I would say. Note that the above have been carefully crafted to include my critiques of both the 100% global cap weighted stock portfolio and the golden butterfly portfolio :-). They also include a deliberate shot at Jim Collins' inane recommendations, and allow an implementation of John Bogle's recommended 60/40 portfolio (with 17% of stocks in international) for those so inclined.

I like it.

This makes a lot of sense to me. I'm Australian and I have about 50% in Australian Shares. It might be a little too much. I think you could go higher in US shares as well simply because it makes up more of the market.

I think the most rational approach is bonds and international shares but for you take on currency risk and for instance in Australia there are tax advantages to owning Australian shares.

Still we are talking small details here. The overall big picture is nicely to me encapsulated in the initial position guidelines.

Classical_Liberal

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Re: Target AA once fired
« Reply #56 on: December 07, 2016, 11:20:57 AM »
A while ago I thought about this and came up with these guidelines:
Not less than 50% should be in stocks
Not more than 50% should be in US Stocks
Not more than 50% should be in International stocks (talking US people here)
Bonds should be at least 10% but not more than 40%

If you make a plan that follows the above and stick to it through thick and thin you have just as good a shot at success as anyone, I would say. Note that the above have been carefully crafted to include my critiques of both the 100% global cap weighted stock portfolio and the golden butterfly portfolio :-). They also include a deliberate shot at Jim Collins' inane recommendations, and allow an implementation of John Bogle's recommended 60/40 portfolio (with 17% of stocks in international) for those so inclined.

+3 

Interest Compound

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Re: Target AA once fired
« Reply #57 on: December 07, 2016, 11:41:22 AM »
A while ago I thought about this and came up with these guidelines:
Not less than 50% should be in stocks
Not more than 50% should be in US Stocks
Not more than 50% should be in International stocks (talking US people here)
Bonds should be at least 10% but not more than 40%

If you make a plan that follows the above and stick to it through thick and thin you have just as good a shot at success as anyone, I would say. Note that the above have been carefully crafted to include my critiques of both the 100% global cap weighted stock portfolio and the golden butterfly portfolio :-). They also include a deliberate shot at Jim Collins' inane recommendations, and allow an implementation of John Bogle's recommended 60/40 portfolio (with 17% of stocks in international) for those so inclined.

+4 Can't disagree with that!

VoteCthulu

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Re: Target AA once fired
« Reply #58 on: December 07, 2016, 03:38:46 PM »
A while ago I thought about this and came up with these guidelines:
Not less than 50% should be in stocks
Not more than 50% should be in US Stocks
Not more than 50% should be in International stocks (talking US people here)
Bonds should be at least 10% but not more than 40%

If you make a plan that follows the above and stick to it through thick and thin you have just as good a shot at success as anyone, I would say. Note that the above have been carefully crafted to include my critiques of both the 100% global cap weighted stock portfolio and the golden butterfly portfolio :-). They also include a deliberate shot at Jim Collins' inane recommendations, and allow an implementation of John Bogle's recommended 60/40 portfolio (with 17% of stocks in international) for those so inclined.
-1
Ok, I'll be the first one to disagree with these guidelines, then.

First, there's no mention of indexing, so allocating 50% to Enron could have met these guidelines.

Second, there's nothing about diversification, so investing 40% in US marijuana companies, 40% in Canadian marijuana companies, and then using the rest to buy bonds issued by those same companies meets these guidelines, but would be a horrible portfolio.

Third, an American who allocates 90% to US stocks violates these guidelines while an European who allocates 90% to Greece stocks is following them. That seems backwards.

Radagast

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Re: Target AA once fired
« Reply #59 on: December 07, 2016, 11:01:02 PM »
A while ago I thought about this and came up with these guidelines:
Not less than 50% should be in stocks
Not more than 50% should be in US Stocks
Not more than 50% should be in International stocks (talking US people here)
Bonds should be at least 10% but not more than 40%

If you make a plan that follows the above and stick to it through thick and thin you have just as good a shot at success as anyone, I would say. Note that the above have been carefully crafted to include my critiques of both the 100% global cap weighted stock portfolio and the golden butterfly portfolio :-). They also include a deliberate shot at Jim Collins' inane recommendations, and allow an implementation of John Bogle's recommended 60/40 portfolio (with 17% of stocks in international) for those so inclined.
-1
Ok, I'll be the first one to disagree with these guidelines, then.

First, there's no mention of indexing, so allocating 50% to Enron could have met these guidelines.

Second, there's nothing about diversification, so investing 40% in US marijuana companies, 40% in Canadian marijuana companies, and then using the rest to buy bonds issued by those same companies meets these guidelines, but would be a horrible portfolio.

Third, an American who allocates 90% to US stocks violates these guidelines while an European who allocates 90% to Greece stocks is following them. That seems backwards.
I started to type a list that would close some of the obvious and huge loopholes but I realized there would still be loopholes, exceptions, and omissions beyond those, probably to infinity. Plus the list seemed off topic. Fund selection, bond selection, or considerations for individual stocks have different guidelines. On the topic "Target AA once FIRE'd" I don't have additions or changes right now. It needs touch up for people outside the US but I doubt I could come up with a few simple guidelines that would apply to all countries. Those who know what the post title means off the top of their heads should be able to connect the dots, while those who want to give away their money have options that are more fun or gratifying than Enron :).

Anyhow thanks for disagreeing. I am pretty embarassed by the compliments, I don't know how to handle those very well.

Thanks for +'s.

arebelspy

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Re: Target AA once fired
« Reply #60 on: December 08, 2016, 12:10:59 AM »
I'd enjoy seeing a (friendly) discussion of: "Here's my improved list" and then "here's the flaws" and then iterating back and forth. Of course it will grow necessarily more complex, but I think it'd be an interesting discussion, if done by people trying to be helpful/learn, not be rude for the sake of being right.

I can understand if you wouldn't be interested in that. If not, maybe someone else will give it a shot.

:)
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VoteCthulu

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Re: Target AA once fired
« Reply #61 on: December 08, 2016, 09:24:44 AM »
Ok, since my last post only pointed out the (IMO) flaws in someone else's work I'll put my thoughts out there.

VoteCthulu's investing guidelines (1st draft):
1) Invest in a Vanguard target fund (or 1-3 large index funds) and forget about it if at all possible. Really. The biggest threat to under-performing the market is reacting to something new you read, chasing hot investments/strategies, or second guessing yourself.

2) If you must do it yourself, I'd start with a baseline of 20% bonds, 40% US stocks, 30% international stocks (both in broad index funds), and 10% WIW (whatever I want). Then adjust the first 3 of those +/-20% based on your personal situation (a 25 y/o might what 0% bonds, a 60y/o might want 40%, etc.). Only change these allocations when your investing goals change.

3) Start with the WIW money in cash, and then do whatever you want with it. Buy some stocks on a hot tip, invest in green companies, buy some gold, tilt towards REITS or small cap, it doesn't really matter. Hopefully this is enough to keep your hands off the other 90% and let it grow.

Gone Fishing

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Re: Target AA once fired
« Reply #62 on: December 08, 2016, 10:02:59 AM »
You know you are retired when you see the title of this thread and think it is talking about this:

http://www.ballisticproducts.com/Winchester-AA-HS-red-12ga-275-once-fired-100_bag/productinfo/AABW121/