The Money Mustache Community
General Discussion => Welcome and General Discussion => Topic started by: BTDretire on December 28, 2016, 08:47:35 AM
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Just checked VTSAX for it's gain this year.
It's up about 12% plus another 1.82% of dividends.
If you had your $1M in VTSAX and spent $40,000,
your portfolio still has and extra $90,000.
May the good times continue.
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May the odds be ever in your favor.
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If you're past FIRE, it's great. If you're a few years out like me, it isn't a good thing.
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If you're past FIRE, it's great. If you're a few years out like me, it isn't a good thing.
I was kind of hoping we would see a correction this year, so I wouldn't be tempted to punch out early.
Of course, I've been hoping that since the 2013 spike, so I probably shouldn't complain.
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yeah i really want to see a good dip for 2 reasons:
1. i'm still buying so all that money can get in at a better price
2. i started full time work in 2010 i havent lived thru a large drawback just want to see what it does to me emotionally.
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yeah i really want to see a good dip for 2 reasons:
1. i'm still buying so all that money can get in at a better price
2. i started full time work in 2010 i havent lived thru a large drawback just want to see what it does to me emotionally.
I definitely agree with number 2. I need to see a drop before I fire just so that I know I can handle loosing $200k and stay the course. If I can't, I'd like to know that before I fire.
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If you're past FIRE, it's great. If you're a few years out like me, it isn't a good thing.
I was kind of hoping we would see a correction this year, so I wouldn't be tempted to punch out early.
Of course, I've been hoping that since the 2013 spike, so I probably shouldn't complain.
We did have a correction earlier this year.
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If you're past FIRE, it's great. If you're a few years out like me, it isn't a good thing.
I was kind of hoping we would see a correction this year, so I wouldn't be tempted to punch out early.
Of course, I've been hoping that since the 2013 spike, so I probably shouldn't complain.
We did have a correction earlier this year.
i guess you could say that. it wasnt much of one. but i did pull out alot of money in december b/c of buying a house not knowing if ours would sell and then dump it all back in ... in late feb/early march so it worked out well for me.
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i guess you could say that. it wasnt much of one. but i did pull out alot of money in december b/c of buying a house not knowing if ours would sell and then dump it all back in ... in late feb/early march so it worked out well for me.
Yea, from December 29th - Feb 11th we had a 15% drop, then a subsequent 25% increase since those lows.
Not too shabby.
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Just checked VTSAX for it's gain this year.
It's up about 12% plus another 1.82% of dividends.
If you had your $1M in VTSAX and spent $40,000,
your portfolio still has and extra $90,000.
May the good times continue.
Don't forget the most important rule of investing: Gains are meaningless on securities that are held.
Easy come, easy go.
This applies to losses as well, but too many people look at a good period like YTD and think "look at all that money I have made!" but unless you sell NOW, you've 'made' nothing.
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We did have a correction earlier this year.
I think a correction is usually defined as a 10% pullback in value. A quick glance at the charts says that we saw around 9% in the S&P500 within the calendar year which is within spitting distance I suppose.
The CAPE (Cyclically Adjusted Price to Earnings) ratio is at 28 though. About what it was at before the recession.
Regular PE on the S&P is 26. Well above it's historic average of around 15.
I'm still long on "the future" in general, but I'd be lying if I said I wasn't at all concerned about US stocks.
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We did have a correction earlier this year.
I think a correction is usually defined as a 10% pullback in value. A quick glance at the charts says that we saw around 9% in the S&P500 this year which is within spitting distance I suppose.
The CAPE (Cyclically Adjusted Price to Earnings) ratio is at 28 though. About what it was at before the recession.
Regular PE on the S&P is 26. Well above it's historic average of around 15.
I'm still long on "the future" in general, but I'd be lying if I said I wasn't at all concerned about US stocks.
VTI went from $106.12 to $92.56 between December 29th and February 11th....or a 12.77% drop
Those are closing prices, if we use intraday the drop was closer to 15% at one point.
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VTI went from $106.12 to $92.56 between December 29th and February 11th....or a 12.77% drop
Those are closing prices, if we use intraday the drop was closer to 15% at one point.
Yeah I was looking at the S&P and only within the calendar year. I'm confident your VTI numbers are accurate so I'll concede there.
I still got a yellow caution light on the market. Earnings growth simply doesn't justify the prices we're seeing.
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VTI went from $106.12 to $92.56 between December 29th and February 11th....or a 12.77% drop
Those are closing prices, if we use intraday the drop was closer to 15% at one point.
Yeah I was looking at the S&P and only within the calendar year. I'm confident your VTI numbers are accurate so I'll concede there.
I still got a yellow caution light on the market. Earnings growth simply doesn't justify the prices we're seeing.
Agreed, I think the market is moving based on sentiment and hopes for relaxed corporate tax policies.
While I am regularly contributing to 401k/HSA/Roth IRA I am holding $25k in dry powder from a rollover IRA to see what happens by end of Q1 next year.
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Agreed, I think the market is moving based on sentiment and hopes for relaxed corporate tax policies.
While I am regularly contributing to 401k/HSA/Roth IRA I am holding $25k in dry powder from a rollover IRA to see what happens by end of Q1 next year.
Oh yeah, I'm still maxing out my tax deferred or tax advantaged equities accounts. But mostly because there's really no better place to turn.
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The CAPE (Cyclically Adjusted Price to Earnings) ratio is at 28 though. About what it was at before the recession.
Regular PE on the S&P is 26. Well above it's historic average of around 15.
That's what I'm interested to see. I expect the drop with the CAPE so high, but I also wonder if some of the large changes in the system over the last decade have made CAPE no longer valid (or, perhaps still valid, but the baseline may be different).
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yeah i really want to see a good dip for 2 reasons:
1. i'm still buying so all that money can get in at a better price
2. i started full time work in 2010 i havent lived thru a large drawback just want to see what it does to me emotionally.
I definitely agree with number 2. I need to see a drop before I fire just so that I know I can handle loosing $200k and stay the course. If I can't, I'd like to know that before I fire.
Agreed. I was in grad school during the 2008 crash, stayed the course, kept investing new money, and came out of it feeling quite good about myself. But my portfolio then was a fraction of its current size. I'd like to think I'd do the same next time, but it's impossible to know.
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The CAPE (Cyclically Adjusted Price to Earnings) ratio is at 28 though. About what it was at before the recession.
Regular PE on the S&P is 26. Well above it's historic average of around 15.
That's what I'm interested to see. I expect the drop with the CAPE so high, but I also wonder if some of the large changes in the system over the last decade have made CAPE no longer valid (or, perhaps still valid, but the baseline may be different).
its been in the 40s pre dot com bubble. so its not unheard of territory.
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If you're past FIRE, it's great. If you're a few years out like me, it isn't a good thing.
I was kind of hoping we would see a correction this year, so I wouldn't be tempted to punch out early.
Of course, I've been hoping that since the 2013 spike, so I probably shouldn't complain.
At a certain point you're going to just be good to go. It would be nice to see you're still there even after a pull-back, though.
yeah i really want to see a good dip for 2 reasons:
1. i'm still buying so all that money can get in at a better price
2. i started full time work in 2010 i havent lived thru a large drawback just want to see what it does to me emotionally.
I definitely agree with number 2. I need to see a drop before I fire just so that I know I can handle loosing $200k and stay the course. If I can't, I'd like to know that before I fire.
I know it wasn't exactly a crash, but I was doing a little happy dance back in February. Then it went back up :( At least it's good for everybody here that's already pulled the plug.
Just checked VTSAX for it's gain this year.
It's up about 12% plus another 1.82% of dividends.
If you had your $1M in VTSAX and spent $40,000,
your portfolio still has and extra $90,000.
May the good times continue.
Don't forget the most important rule of investing: Gains are meaningless on securities that are held.
Easy come, easy go.
This applies to losses as well, but too many people look at a good period like YTD and think "look at all that money I have made!" but unless you sell NOW, you've 'made' nothing.
I wish people would stop talking about "money" when they refer to stocks. It's not money, it's equity. You don't actually have any money. If the market takes a dive, you've still got the same number of shares. I know it's just semantics, but it's a semantic misconception that really affects the way people react.
The CAPE (Cyclically Adjusted Price to Earnings) ratio is at 28 though. About what it was at before the recession.
Regular PE on the S&P is 26. Well above it's historic average of around 15.
That's what I'm interested to see. I expect the drop with the CAPE so high, but I also wonder if some of the large changes in the system over the last decade have made CAPE no longer valid (or, perhaps still valid, but the baseline may be different).
Yes, I think some accounting changes had some effects, but interest rates have been super low for a while. Stocks had to go way up for risk premiums to revert to their mean. Interest rates are going back, up though, so it will be interesting to see how that plays out. I guess the market is still going up because it sees interest rates as a sign the economy is taking off. I personally think there will be a "correction," but I mean that in a much vaguer sense than most people. The market may correct itself with a crash, but it also might correct itself with a rise in earnings, inflation, or something else I can't predict. And as we've seen over the past couple of years, nobody knows what the timing of that will be.
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Canadian S&P/TSX ETF killed it this year... particular the one we hold below,
https://www.blackrock.com/ca/individual/en-ca/products/239846/ishares-sptsx-equity-income-index-etf
Mind you 2015 was a crappy year.
I'm heavier on Canadian equities as it's taxing is much friendly and it's nice to get some REALLY heavy gains this year on it, although we are still pretty balanced
We get a bit shortchanged on VanG ETFS here in Canada, the fees are a tad higher and iShares has really upped their game.
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Ugh...I've been sitting on enough dry powder to open a VTSAX but I'm too risk averse.
So it's just sitting in a savings account not earning any interest. :(
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Ugh...I've been sitting on enough dry powder to open a VTSAX but I'm too risk averse.
So it's just sitting in a savings account not earning any interest. :(
At least put it in a CD or other no risk investment. Have to avoid or at least mitigate the losses due to inflation.
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Or just quit trying to time it and drop it in
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Ugh...I've been sitting on enough dry powder to open a VTSAX but I'm too risk averse.
So it's just sitting in a savings account not earning any interest. :(
VTSAX dividend rate is 1.82% right now. If you completely ignore what the market is doing you'll still be making that much.
Your savings account is also risky. You risk missing dividends, and you risk losing money to inflation. And those are risks you've actually already hit. You just missed December's VTSAX dividend payout, and you lost 1.8% of your money to inflation over the past year. Both dividends and inflation are likely to pick up soon, too.
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Ugh...I've been sitting on enough dry powder to open a VTSAX but I'm too risk averse.
So it's just sitting in a savings account not earning any interest. :(
I was expecting a drop a few months ago and was nervous about putting more into VTSAX. However, I'd hit my agreed upon numbers for doing so. I did. Things kept going up. I'm glad I didn't delay...
It's oh so tempting to try and do some variation on market timing, but for us normal people it just doesn't work. The losses from not being in are easier to accept, but just as real. You really need to define your goals, limits, and times, then stick to them.
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Ugh...I've been sitting on enough dry powder to open a VTSAX but I'm too risk averse.
So it's just sitting in a savings account not earning any interest. :(
I would think it would be more risky to give up huge gains and compounding than it would be to buy into the market.
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The CAPE (Cyclically Adjusted Price to Earnings) ratio is at 28 though. About what it was at before the recession.
Regular PE on the S&P is 26. Well above it's historic average of around 15.
That's what I'm interested to see. I expect the drop with the CAPE so high, but I also wonder if some of the large changes in the system over the last decade have made CAPE no longer valid (or, perhaps still valid, but the baseline may be different).
its been in the 40s pre dot com bubble. so its not unheard of territory.
But pre-GAAP earnings are not really comparable.
GAAP pushed down earnings and inflated PE.
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GAAP has been around >75 years, right?
I'm not following exactly what accounting treatment differences you're referring to Tom. Can you help explain?
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Guys. All this talk of hoping for a correction so one can buy cheaper is wrong thinking on many levels. I would discourage it.
1) the idea of an inevitable correctionis flawed in that it is not true. The market may never drop. Talk about it encourages sideline sitters.
2) the idea one can time the market to pile more money in (buy low-sell high advice) encourages market timing thinking, which is also correllated with underperformance
3) market volatility has externalities that actually hurt corporate earnings, which are what power dividends and share price. We should hope for slow steady gains as that is what best for the steady appreciation of the underlying assets
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Guys. All this talk of hoping for a correction so one can buy cheaper is wrong thinking on many levels. I would discourage it.
Yup. So many examples of people sitting on the sidelines in fear have been posted on this forum in 2016...some for years. The most liberating thing I've learned about investing is that I cannot predict the future so just invest my money in broad market index funds and get on with working on parts of my FIRE plan that I can control like savings/spending and staying healthy so I can actually take advantage of the free time I'm working towards when I do FIRE.
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The CAPE (Cyclically Adjusted Price to Earnings) ratio is at 28 though. About what it was at before the recession.
Regular PE on the S&P is 26. Well above it's historic average of around 15.
That's what I'm interested to see. I expect the drop with the CAPE so high, but I also wonder if some of the large changes in the system over the last decade have made CAPE no longer valid (or, perhaps still valid, but the baseline may be different).
its been in the 40s pre dot com bubble. so its not unheard of territory.
But pre-GAAP earnings are not really comparable.
GAAP pushed down earnings and inflated PE.
Not only accounting, but one has to compare risk free returns like US treasuries. Before the great recession 10 yr Treasury yields were hovering between 4-5 percent. Recently, (until Trump) they were 1.5, now up to 2.5. Relatively speaking, the risk premium for stocks is much higher today at a 28 P/E 10 than it was for a 28 P/E 10 in 2007. The market is less overpriced than a superficial look makes it out to be. On top of that, many international markets are a downright decent deal with the strong dollar. I'm bullish for someone with a total world exposure. Listen to PizzaSteve, it's time to buy!
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Listen to PizzaSteve, it's time to buy!
Or don't listen to PizzaSteve, and it's still time to buy. It's always time to buy.
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It's always time to buy.
This is all that one needs to know about investing!
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When I saw my recent gains in my 401k stock funds, I thought immediately about swapping to some bond funds, but then realized I was getting into market timing thinking and would be really annoyed if stocks kept going up, much more so than if I do nothing and stocks go down. The small potential gains pale in comparison to the value of just not thinking about it. I'll check my balance again in six months.
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Two things I've learned (sort of already knew) since FIRE.....I am not a good individual stock picker. I had carved out about 10% to have some fun and become more engaged. The return has been lower than VTSAX.
And, I am not a good market timer. Back when SnP was about 1400 (and had already risen a lot from the bottom), I was skeptical and pulled out a chunk from a Vanguard index fund. In retrospect, very poor choice. Didn't miss the full ride as I put back in a couple years ago.
I am slowing winding down my individual stock picks and place the cash into VTSAX, etc.
The timing choices I may make going forward will be expense-related or a rotation from stock to paying down rental home loan. But, I won't park it on the side like I did last time.
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Looking at my allocations, with the US markets outperforming, I'm re-balancing into the 3 relative losers, Europe, Emerging and Frontier.
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Looking at my allocations, with the US markets outperforming, I'm re-balancing into the 3 relative losers, Europe, Emerging and Frontier.
why ... this is market timing... a bad move in general unless you're just rebalancing back to what your AA is supposed to be.
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Re-balancing back to my original allocations my friend.
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That makes sense in general.
I believe that VTSAX (or VFIAX) has adequate international exposure that I don't go specifically seeking international exposure outside of VTSAX/VFIAX.
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Nothing wrong with that approach at all.
My portfolio is biased towards mid cap, small cap, micro cap, value, emerging and frontier. The odds are good that my portfolio will significantly outperform something like 100% VTSAX. I have a long timeline and market volatility doesn't bother me in the least. So for me personally, this is the optimal approach.
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Although I am 100% equities in my portfolio, 25% is devoted to international exposure (VTSNX) leaving 75% for domestic (VIIIX). JLCollins makes a compelling argument regarding the inherent VTSAX international exposure however I was convinced after reading Vanguard's Global Equities: Balancing Home Bias and Diversification (https://personal.vanguard.com/pdf/ISGGEB.pdf) research paper to diversify my portfolio globally.
In light of quantitative analysis and qualitative considerations, we have demonstrated that domestic investors should consider allocating part of their portfolios to international securities, and that a 20% allocation may be a reasonable starting point. Although finance theory dictates that an upper asset allocation limit should be based on the global market capitalization for international equities (currently approximately 51%), we have demonstrated that international allocations exceeding 40% have not historically added significant additional diversification benefits, particularly accounting for costs. For many investors, an allocation between 20% and 40% should be considered reasonable, given the historical benefits of diversification. Allocations closer to 40% may be suitable for those investors seeking to be closer to a market proportional weighting or for those who are hoping to obtain potentially greater diversification benefits and are less concerned with the potential risks and higher costs. On the other hand, allocations closer to 20% may be viewed as offering a greater balance among the benefits of diversification, the risks of currency volatility and higher U.S. to non-U.S. stock correlations, investor preferences, and costs.
Out of curiosity, for those that are 100% VTSAX my assumption is you are adhering to a self cleansing strategy on a micro-economic level. Why not implement the same underlying strategy on a macro-economic level? Do you believe the United States' economy will continue to outperform all others in the foreseeable future and on the off chance that it does not, the 'international exposure' in VTSAX is good enough to reap the gains in the ex-US economies?
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Although I am 100% equities in my portfolio, 25% is devoted to international exposure (VTSNX) leaving 75% for domestic (VIIIX). JLCollins makes a compelling argument regarding the inherent VTSAX international exposure however I was convinced after reading Vanguard's Global Equities: Balancing Home Bias and Diversification research paper to diversify my portfolio globally. In light of quantitative analysis and qualitative considerations, we have demonstrated that domestic investors should consider allocating part of their portfolios to international securities, and that a 20% allocation may be a reasonable starting point. Although finance theory dictates that an upper asset allocation limit should be based on the global market capitalization for international equities (currently approximately 51%), we have demonstrated that international allocations exceeding 40% have not historically added significant additional diversification benefits, particularly accounting for costs. For many investors, an allocation between 20% and 40% should be considered reasonable, given the historical benefits of diversification. Allocations closer to 40% may be suitable for those investors seeking to be closer to a market proportional weighting or for those who are hoping to obtain potentially greater diversification benefits and are less concerned with the potential risks and higher costs. On the other hand, allocations closer to 20% may be viewed as offering a greater balance among the benefits of diversification, the risks of currency volatility and higher U.S. to non-U.S. stock correlations, investor preferences, and costs.
Out of curiosity, for those that are 100% VTSAX my assumption is you are adhering to a self cleansing strategy on a micro-economic level. Why not implement the same underlying strategy on a macro-economic level? Do you believe the United States' economy will continue to outperform all others in the foreseeable future and on the off chance that it does not, the 'international exposure' in VTSAX is good enough to reap the gains in the ex-US economies?
even bogle thinks VTSAX has enough international exposure
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The CAPE (Cyclically Adjusted Price to Earnings) ratio is at 28 though. About what it was at before the recession.
Regular PE on the S&P is 26. Well above it's historic average of around 15.
That's what I'm interested to see. I expect the drop with the CAPE so high, but I also wonder if some of the large changes in the system over the last decade have made CAPE no longer valid (or, perhaps still valid, but the baseline may be different).
its been in the 40s pre dot com bubble. so its not unheard of territory.
But pre-GAAP earnings are not really comparable.
GAAP pushed down earnings and inflated PE.
Not only accounting, but one has to compare risk free returns like US treasuries. Before the great recession 10 yr Treasury yields were hovering between 4-5 percent. Recently, (until Trump) they were 1.5, now up to 2.5. Relatively speaking, the risk premium for stocks is much higher today at a 28 P/E 10 than it was for a 28 P/E 10 in 2007. The market is less overpriced than a superficial look makes it out to be. On top of that, many international markets are a downright decent deal with the strong dollar. I'm bullish for someone with a total world exposure. Listen to PizzaSteve, it's time to buy!
I made a similar argument in another thread not too long ago about the CAPE/PE being somewhat skewed currently. I do still think its high but not as high as it would seem.
Also regarding the Shiller PE one should think about the last 10 years. Sure the Shiller PE is at 27 right now and the PE is at 25. But in 2009 when the collapse happened and earnings plummeted (a lot attributed to non-cash charge offs/write downs) the PE spiked.
So as a proxy if you take the average of the last 120 months PE it would currently be 26, but if you simply removed the 10 months with the highest and lowest PE ratios the average PE would drop to 20 - still high but its something to think about when there are very large swings up or down.
So I don't think that the Shiller PE may not be as high as it really indicates
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yep i remember that comment tooq. it was a well thought out comment and something that does make a lot of sense. 20 is not really that high either. would equate to a 5% SWR ... thats alot
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I made a similar argument in another thread not too long ago about the CAPE/PE being somewhat skewed currently. I do still think its high but not as high as it would seem.
Also regarding the Shiller PE one should think about the last 10 years. Sure the Shiller PE is at 27 right now and the PE is at 25. But in 2009 when the collapse happened and earnings plummeted (a lot attributed to non-cash charge offs/write downs) the PE spiked.
So as a proxy if you take the average of the last 120 months PE it would currently be 26, but if you simply removed the 10 months with the highest and lowest PE ratios the average PE would drop to 20 - still high but its something to think about when there are very large swings up or down.
So I don't think that the Shiller PE may not be as high as it really indicates
Classical_liberal denies complicity in stealing concepts from tooqk4u22! :) Multiple discovery? or great minds?
I remember awhile back, I ran a P/E10 without the 2009 spike (did a P/E 9, nixing 2009) and it impacted the current ratio by only about 0.5 (this was a few month ago), not too substantial. I had not thought to remove highest and lowest mo's... very interesting indeed. Did you just randomly pick 10 mos or cherry pick that for any particular reason?
Also of note in the whole situation is the current earnings recession, it ain't pretty. As of June 30th, 12 mo EPS of S&P was only 87.17, from a high of 107.61 only 20 mos earlier. That type of movement is usually seen in recessions. However, it appears ZIRP may have pushed one off with the very significant Q3 GDP growth revised at 3.2%. If earnings start to rebound, along with pro-business tax cuts, rising interest rates may not concern investors much. I second my bullishness!
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It's going to suck when this rally ends. The daily gains have been incredulous. Probably will see my account increase $7500 just today.
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The equity gains the past 2 months haven't been as great for me since I'm about 35-40% in bonds/REITs, which have been hammered. I have to keep reminding myself that my current allocation will pay off during the next recession.
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If the market hadn't dropped the last 3 days, I would have finished in the top 10 (of 610) in the bogleheads market predictor competition. So close!
No clue what will happen in 2017, but after basically giving up on buying any bonds through most of 2016 I finally picked some up when BND was at 80. It seems like everyone is seeing the rosy side of trump "good for business!" right now without the downsides. I have no clue where the S&P 500 will end the year (would personally guess around an 8% gain), but I bet there will be some bumps along the way and it'll be nice having some in bonds to ride that out and potentially buy some dips. Or maybe it will just be up up up and I'll regret the bond buys, but at least got in at 80 instead of 85.
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Didn't we have a bunch of 2016 market prediction threads? I definitely remember taking bets. Can anyone find those buried in the forum archives?
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If the market hadn't dropped the last 3 days, I would have finished in the top 10 (of 610) in the bogleheads market predictor competition. So close!
No clue what will happen in 2017, but after basically giving up on buying any bonds through most of 2016 I finally picked some up when BND was at 80. It seems like everyone is seeing the rosy side of trump "good for business!" right now without the downsides. I have no clue where the S&P 500 will end the year (would personally guess around an 8% gain), but I bet there will be some bumps along the way and it'll be nice having some in bonds to ride that out and potentially buy some dips. Or maybe it will just be up up up and I'll regret the bond buys, but at least got in at 80 instead of 85.
Time to start the 2017 prediction threads!
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If the market hadn't dropped the last 3 days, I would have finished in the top 10 (of 610) in the bogleheads market predictor competition. So close!
No clue what will happen in 2017, but after basically giving up on buying any bonds through most of 2016 I finally picked some up when BND was at 80. It seems like everyone is seeing the rosy side of trump "good for business!" right now without the downsides. I have no clue where the S&P 500 will end the year (would personally guess around an 8% gain), but I bet there will be some bumps along the way and it'll be nice having some in bonds to ride that out and potentially buy some dips. Or maybe it will just be up up up and I'll regret the bond buys, but at least got in at 80 instead of 85.
Time to start the 2017 prediction threads!
Money raining from the skies ala 2013 ...
also burning fire of hell ala 2008
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If the market hadn't dropped the last 3 days, I would have finished in the top 10 (of 610) in the bogleheads market predictor competition. So close!
No clue what will happen in 2017, but after basically giving up on buying any bonds through most of 2016 I finally picked some up when BND was at 80. It seems like everyone is seeing the rosy side of trump "good for business!" right now without the downsides. I have no clue where the S&P 500 will end the year (would personally guess around an 8% gain), but I bet there will be some bumps along the way and it'll be nice having some in bonds to ride that out and potentially buy some dips. Or maybe it will just be up up up and I'll regret the bond buys, but at least got in at 80 instead of 85.
Time to start the 2017 prediction threads!
JL Collins has an annual market predictions thread, the Louis Rukeyser Memorial Stock Market Predictions (or something like that) contest. Fun stuff.
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Overall my asset allocation did approx. 12% return this year with dividends. My guess is 10% in 2017. I'll try and remember this prediction when I calculate my year end stats.
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I made a similar argument in another thread not too long ago about the CAPE/PE being somewhat skewed currently. I do still think its high but not as high as it would seem.
Also regarding the Shiller PE one should think about the last 10 years. Sure the Shiller PE is at 27 right now and the PE is at 25. But in 2009 when the collapse happened and earnings plummeted (a lot attributed to non-cash charge offs/write downs) the PE spiked.
So as a proxy if you take the average of the last 120 months PE it would currently be 26, but if you simply removed the 10 months with the highest and lowest PE ratios the average PE would drop to 20 - still high but its something to think about when there are very large swings up or down.
So I don't think that the Shiller PE may not be as high as it really indicates
Classical_liberal denies complicity in stealing concepts from tooqk4u22! :) Multiple discovery? or great minds?
I remember awhile back, I ran a P/E10 without the 2009 spike (did a P/E 9, nixing 2009) and it impacted the current ratio by only about 0.5 (this was a few month ago), not too substantial. I had not thought to remove highest and lowest mo's... very interesting indeed. Did you just randomly pick 10 mos or cherry pick that for any particular reason?
It is the truncated mean which is meant to middle the data and remove any significant outliers and you take the same number out at top and bottom. The trick is to remove a sufficient amount to smooth the data but not so much/little that it skews it further. 10 months is 8.3% on either end, maybe 12 fro 10% would be better but doubt it would matter much.
Also of note in the whole situation is the current earnings recession, it ain't pretty. As of June 30th, 12 mo EPS of S&P was only 87.17, from a high of 107.61 only 20 mos earlier. That type of movement is usually seen in recessions. However, it appears ZIRP may have pushed one off with the very significant Q3 GDP growth revised at 3.2%. If earnings start to rebound, along with pro-business tax cuts, rising interest rates may not concern investors much. I second my bullishness!
Keep in mind that the earnings decline is primarily attributed to the energy sector and slightly to materials - both of which are rebounding a bit as the muddy waters clear. The rest of the market is doing fairly well and financials should start to grow again simply due to rising rates as you say, let alone prospects for a softening in regulation.
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So I decided to pull the trigger and buy VTSAX in my Roth IRA at my bank.
But they wanted to charge me a $45 commission/fee... hrmmm I work hard for my money. no.
So I called Vanguard and setup an account today for free.
Anyone else gone through this process?
I supposedly have to print and fill out paperwork and get a signer guarantor...
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I had to do a notarized signature on some rollovers for my wife (as the consenting spouse), but I've never had to do a signature guarantee/notarization on opening other Vanguard accounts, including personal, rollover [when I was single], UTMA, nor 529.
In any case, it's even worth it just to avoid the $45 BS commission, but I found vanguard extremely easy to work with.
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I had to do a notarized signature on some rollovers for my wife (as the consenting spouse), but I've never had to do a signature guarantee/notarization on opening other Vanguard accounts, including personal, rollover [when I was single], UTMA, nor 529.
In any case, it's even worth it just to avoid the $45 BS commission, but I found vanguard extremely easy to work with.
Yeah, I was pleasantly surprised. Great customer service. (No I am not affiliated with Vanguard and I'm not selling anything.)
I bank with USAA and they are also amazing, but since they started opening membership to civilians years ago there has been a gradual change...not for the better. They give the HARD SELL on insurance and in house brokerage products now. The "financial advisors" have tried twice to steer me away from mutual funds from other institutions (Vanguard.) Was pretty disappointed because I used to be their biggest fan.
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Vanguards service is top notch.
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I had to do a notarized signature on some rollovers for my wife (as the consenting spouse), but I've never had to do a signature guarantee/notarization on opening other Vanguard accounts, including personal, rollover [when I was single], UTMA, nor 529.
In any case, it's even worth it just to avoid the $45 BS commission, but I found vanguard extremely easy to work with.
Yeah, I was pleasantly surprised. Great customer service. (No I am not affiliated with Vanguard and I'm not selling anything.)
I bank with USAA and they are also amazing, but since they started opening membership to civilians years ago there has been a gradual change...not for the better. They give the HARD SELL on insurance and in house brokerage products now. The "financial advisors" have tried twice to steer me away from mutual funds from other institutions (Vanguard.) Was pretty disappointed because I used to be their biggest fan.
At some point USAA decided they needed to play all of the games, not just banking and insurance. They're terrible (but not the worst) when it comes to their investing business.
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Yeah, I was pleasantly surprised. Great customer service. (No I am not affiliated with Vanguard and I'm not selling anything.)
I bank with USAA and they are also amazing, but since they started opening membership to civilians years ago there has been a gradual change...not for the better. They give the HARD SELL on insurance and in house brokerage products now. The "financial advisors" have tried twice to steer me away from mutual funds from other institutions (Vanguard.) Was pretty disappointed because I used to be their biggest fan.
This is completely unrelated to this thread, but USAA annoyed me a great deal last year. We had our auto insurance, renters insurance, and a checking account with them. We bought a house and found that State Farm would save us about $10 a month over what USAA offered, between house and auto insurance combined.
They gave me all sorts of grief about how I shouldn't leave them over "just" $10 (if it's just $10, why USAA couldn't match it?). Worse, they gave me some kind of guilt trip about how they were so awesome and that "I may not be able to get covered by USAA in the future" (ignoring that we still have a checking account, and I'm a veteran; oh, and we'd been customers for over a decade). Left a VERY sour taste in my mouth.
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I'm a ~30 year customer of USAA and think their insurance and banking products are top-notch. Very good customer service and I wouldn't leave them over $10/year for sure. (That's just me, though I understand different people have different priorities and sometimes it's a principle thing. I stopped using a company I really liked over a matter that was $0.71 economically.)
That said, their investment and brokerage products are absolutely terrible. Pricing is not competitive. Web UI seems like a poorly skinned mainframe application. Policies are inflexible. Systems are slow. And did I mention that pricing wasn't competitive? I used them for a short while with some 401K rollovers, but moved all that out.
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OP to be honest this year has been very good for equities. To be fair, most index funds will have comparable results.
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My portfolio of individual stocks almost doubled that performance but I want to start putting some money into VTSAX for less risk
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OP to be honest this year has been very good for equities. To be fair, most index funds will have comparable results.
Very incorrect statement. Small caps and mid caps greatly outperformed the total us market and foreign lagged.
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A nice chart, though doesn't break up as much as you could Investment Returns By Asset Class, 2016 Year-End Review
(http://cdn.mymoneyblog.com/wordpress/wp-content/uploads/2017/01/2016annual1.gif)
(http://cdn.mymoneyblog.com/wordpress/wp-content/uploads/2017/01/2016annual2.gif)
(http://www.mymoneyblog.com/asset-class-returns-2016-year-end.html)
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OP to be honest this year has been very good for equities. To be fair, most index funds will have comparable results.
Stocks in general have done well. I was just celebrating that fact.
I also have a large chunk of my money in VTSAX, that is why I referenced it.
I went back and checked VTSAX over the 8 years (Obama's term) it is up 58% or 7.25% per year.
I thought it was going to be higher.
I only have my networth recorded from 12-31-10 to 12-31-16, I almost have a double,
1.94 multiple, in those 6 years. (growth plus savings)
I also noted during the 6 years VTSAX is up 56.5%, we had a trough in VTSAX's prices
during 08 and 09.
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Here is more complete data for 2016 taken from https://www.portfoliovisualizer.com/historical-asset-class-returns:
Inflation 2.04%
US Stock Market 12.53%
US Large Cap 11.82%
US Large Cap Value 16.75%
US Large Cap Growth 5.99%
US Mid Cap 11.07%
US Mid Cap Value 15.11%
US Mid Cap Growth 6.62%
US Small Cap 18.17%
US Small Cap Value 24.65%
US Small Cap Growth 10.61%
US Micro Cap 21.47%
Intl Stock Market 4.65%
Developed Markets 2.45%
International Small Cap 4.17%
International Value 5.05%
European Stocks -0.80%
Pacific Stocks 5.19%
Emerging Markets 11.55%
Cash 0.20%
Short Term Treasury 1.09%
Intermediate Term Treasury 1.19%
10-year Treasury 1.00%
Long Term Treasury 1.21%
Total Bond Market 2.50%
TIPS 4.52%
Global Bonds (Unhedged) 4.02%
Global Bonds (USD Hedged) 6.07%
Short-Term Investment Grade 2.75%
Corporate Bonds 6.21%
Long-Term Corporate Bonds 7.83%
High Yield Corporate Bonds 11.21%
Short-Term Tax-Exempt 0.36%
Intermediate-Term Tax-Exempt 0.09%
Long-Term Tax-Exempt 0.62%
REIT 8.34%
Gold 8.03%
Precious Metals 50.64%
Commodities 10.12%
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Here is more complete data taken from https://www.portfoliovisualizer.com/historical-asset-class-returns:
Inflation 2.04%
US Stock Market 12.53%
US Large Cap 11.82%
US Large Cap Value 16.75%
US Large Cap Growth 5.99%
US Mid Cap 11.07%
US Mid Cap Value 15.11%
US Mid Cap Growth 6.62%
US Small Cap 18.17%
US Small Cap Value 24.65%
US Small Cap Growth 10.61%
US Micro Cap 21.47%
Intl Stock Market 4.65%
Developed Markets 2.45%
International Small Cap 4.17%
International Value 5.05%
European Stocks -0.80%
Pacific Stocks 5.19%
Emerging Markets 11.55%
Cash 0.20%
Short Term Treasury 1.09%
Intermediate Term Treasury 1.19%
10-year Treasury 1.00%
Long Term Treasury 1.21%
Total Bond Market 2.50%
TIPS 4.52%
Global Bonds (Unhedged) 4.02%
Global Bonds (USD Hedged) 6.07%
Short-Term Investment Grade 2.75%
Corporate Bonds 6.21%
Long-Term Corporate Bonds 7.83%
High Yield Corporate Bonds 11.21%
Short-Term Tax-Exempt 0.36%
Intermediate-Term Tax-Exempt 0.09%
Long-Term Tax-Exempt 0.62%
REIT 8.34%
Gold 8.03%
Precious Metals 50.64%
Commodities 10.12%
Data for 2016. Go back in time and look at prior years, esp. 2008!
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Here is more complete data taken from https://www.portfoliovisualizer.com/historical-asset-class-returns:
Snip
Data for 2016. Go back in time and look at prior years, esp. 2008!
whats your point with this statement. canuck was providing data of individual sections of the market per the conversation going on that VTI performed the best.
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Go back in time and look at prior years, esp. 2008!
Hey if you are going back in time can you send me an email with the last few years of market data? ;)
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Not being critical at all, just clarifying it's 2016 data.
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I guess I have all the wrong international and emerging market funds... They're *down* 4%... Luckily I'm not too heavy in them...
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I guess I have all the wrong international and emerging market funds... They're *down* 4%... Luckily I'm not too heavy in them...
What funds do you have?
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I guess I have all the wrong international and emerging market funds... They're *down* 4%... Luckily I'm not too heavy in them...
Why are they the wrong funds? High expense ratio?
International markets haven't been doing that well lately, but that's how it goes. I'm sure the script will flip at some point. Past performance is not indicative of future results.
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Why are they the wrong funds?
BlueMR2 was commenting on his funds' performance relative to the metrics posted above my CannuckExpat.
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Post FIRE: Yay! Keep going up!
Pre FIRE: Ahhhhh!!! Pray for a massive, massive drop!
Two sides to every coin in this zero sum game! :)
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Not being critical at all, just clarifying it's 2016 data.
I modified that original post of mine, in case it was confusing that it was or wasn't 2016 data. I certainly don't think any one should expect returns like that all the time, or invest only in only in commodities :)
Though speaking of going back in time to 2008:
If you invested $10,000 in a balanced fund on January 1st 2008, you'd have $15,544 today.
If you invested $10,000 in a balanced fund on January 1st 2009, you'd have $23,753 today.
Obviously, I'd rather have the second return, but even the first isn't too shabby. I took those numbers from here (http://www.mymoneyblog.com/decade-of-saving-2016.html), which I think is a good illustration of how it all evens out in the end.
It's fun to talk about year end returns and how individual asset classes did, but in practice I have an asset allocation that I'm comfortable with and that more or less resembles the total stock market at least (with a slight small value tilt and extra REIT allocation), we just invest(ed) regularly as we have cash and hope the markets do their work.
I guess I have all the wrong international and emerging market funds... They're *down* 4%... Luckily I'm not too heavy in them...
Are your returns in USD or another currency?
If I'm reading correctly, the benchmarks for the data I posted are:
Vanguard Total International Stock Index Fund (VGTSX)
Vanguard Emerging Markets Stock Index Fund (VEIEX)
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I have an asset allocation that I'm comfortable with and that more or less resembles the total market (with a slight small value tilt and extra REIT allocation)
Choosing an asset allocation is not as easy as most people believe. If you are an indexer, are you proportional to the stock market, the stock and bond market, the stock and bond and private equity market, the stock and bond and PE and real estate market, or some subset of those plus maybe gold or currencies? Are you cap weighted or price weighted in each of those?
People think indexing protects them by making everything simple. People don't know how much they don't know about what they don't know.
The global real estate market alone is approximately 60% of all global wealth, but very few of us are invested 60% in real estate. And for good reasons. Most of us are vastly overweighted in publicly traded American companies.
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The global real estate market alone is approximately 60% of all global wealth, but very few of us are invested 60% in real estate. And for good reasons. Most of us are vastly overweighted in publicly traded American companies.
A lot of homeowners are vastly overweight real estate (more than 60% asset allocation to RE).
If you have a $250K home, $50K of equity in it and a total net worth of $417K, you are 60% invested in real estate (IMO).
On an asset value basis, I'm almost 50% invested in real estate, despite having significant non-real estate holdings.
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The global real estate market alone is approximately 60% of all global wealth, but very few of us are invested 60% in real estate. And for good reasons. Most of us are vastly overweighted in publicly traded American companies.
A lot of homeowners are vastly overweight real estate (more than 60% asset allocation to RE).
If you have a $250K home, $50K of equity in it and a total net worth of $417K, you are 60% invested in real estate (IMO).
On an asset value basis, I'm almost 50% invested in real estate, despite having significant non-real estate holdings.
This is a very interesting concept, and one I have never considered.
So, for someone like myself who currently rents and has a combined (with my SO) net worth of ~$300k, if we were to purchase a $300k home we would automatically be invested 50% in real estate?
It makes sense from an asset value standpoint, would a similar concept apply to a leveraged ETF?
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From a VAR (value-at-risk) standpoint, I'd treat a 3x levered S&P 500 product as having 3x the exposure of the net asset value.
There may be a different formal VAR treatment of that product, but that's probably pretty close. If you have $100K face value 3x levered holding and the underlying asset goes up (or down) 10%, your gain (or loss) is $30K, not $10K, so I think it's reasonable to treat your position from an unlevered asset allocation perspective at $300K NAV.
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From a VAR (value-at-risk) standpoint, I'd treat a 3x levered S&P 500 product as having 3x the exposure of the net asset value.
There may be a different formal VAR treatment of that product, but that's probably pretty close. If you have $100K face value 3x levered holding and the underlying asset goes up (or down) 10%, your gain (or loss) is $30K, not $10K, so I think it's reasonable to treat your position from an unlevered asset allocation perspective at $300K NAV.
This is very interesting stuff. If you don't mind me asking, where did you learn about this stuff?
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A lot of homeowners are vastly overweight real estate (more than 60% asset allocation to RE).
If you have a $250K home, $50K of equity in it and a total net worth of $417K, you are 60% invested in real estate (IMO).
On an asset value basis, I'm almost 50% invested in real estate, despite having significant non-real estate holdings.
This is a very interesting concept, and one I have never considered.
So, for someone like myself who currently rents and has a combined (with my SO) net worth of ~$300k, if we were to purchase a $300k home we would automatically be invested 50% in real estate?
It makes sense from an asset value standpoint, would a similar concept apply to a leveraged ETF?
I always look at it the opposite of sokoloff; only the equity that you have in your house (or better, difference between mortgage remaining and fair market value) is what you count in your net worth.
Saying someone has $50k in home equity on a $250k house, and $417k net worth, I'd assume they have $367k in some other sort of investment. Maybe it's because of accounting classes, but you have to still consider debt (the mortgage) in your net worth calculations.
Edit: Seeing sokoloff's 2nd response to that, it seems like he's talking about considering the house as a leveraged asset. But that only makes sense is you're actually leveraging it; so doing something like taking out a HELOC and investing that.
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Not being critical at all, just clarifying it's 2016 data.
I modified that original post of mine, in case it was confusing that it was or wasn't 2016 data. I certainly don't think any one should expect returns like that all the time, or invest only in only in commodities :)
Though speaking of going back in time to 2008:
If you invested $10,000 in a balanced fund on January 1st 2008, you'd have $15,544 today.
If you invested $10,000 in a balanced fund on January 1st 2009, you'd have $23,753 today.
Or, on May 13 2008, you could have had $393,000 in VTSAX.
and then on Feb. 28, 2009 you only had $235,000 in VTSAX.
But, as would be expected the balance is a lot higher now!
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I always look at it the opposite of sokoloff; only the equity that you have in your house (or better, difference between mortgage remaining and fair market value) is what you count in your net worth.
Saying someone has $50k in home equity on a $250k house, and $417k net worth, I'd assume they have $367k in some other sort of investment. Maybe it's because of accounting classes, but you have to still consider debt (the mortgage) in your net worth calculations.
While I understand and agree with you in terms of net worth calculation, I think sokoloff's explanation is more in terms of your asset allocation or asset exposure. His explanation makes a lot of sense. If you have a $250k house with $50k equity and there is a RE crash and your house is suddenly worth $125k, you took a $125k bath regardless of your equity.
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Edit: Seeing sokoloff's 2nd response to that, it seems like he's talking about considering the house as a leveraged asset. But that only makes sense is you're actually leveraging it; so doing something like taking out a HELOC and investing that.
Unless you own the house you are leveraged with a mortgage.
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I always look at it the opposite of sokoloff; only the equity that you have in your house (or better, difference between mortgage remaining and fair market value) is what you count in your net worth.
Saying someone has $50k in home equity on a $250k house, and $417k net worth, I'd assume they have $367k in some other sort of investment. Maybe it's because of accounting classes, but you have to still consider debt (the mortgage) in your net worth calculations.
While I understand and agree with you in terms of net worth calculation, I think sokoloff's explanation is more in terms of your asset allocation or asset exposure. His explanation makes a lot of sense. If you have a $250k house with $50k equity and there is a RE crash and your house is suddenly worth $125k, you took a $125k bath regardless of your equity.
I suppose that's sort of true, but you only really took a loss of $75k in that scenario.
So I guess what I'm trying to say is that I would only use what I consider "net worth" (as I said above, this would be fair market value minus remaining mortgage) as a consideration on what to include in "assets." Since the discussion was about asset allocation, that makes the most sense to me. Including the entire mortgage value while ignoring the debt portion doesn't give an accurate reflection of what your total holdings are, since you can't liquidate something you don't own (make the mortgage vanish).
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This is very interesting stuff. If you don't mind me asking, where did you learn about this stuff?
I worked for two different Wall St firms in the past (D. E. Shaw & Co [a hedge fund] and Merrill Lynch). I wasn't on the quant side, but rather on the software side.
That's probably half of my background in finance; the other half is taking a personal interest in my personal finances, reading voraciously, and applying my educational background in engineering to finance.
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Right, this is just like deciding if you are price weighted or cap weighted in your stock index. They are different ways to count up these numbers to determine what you think is the right amount if exposure to have, and I don't know that one way is definitely better than the other for determining your asset allocation. That's up to you, and saying "I just buy the index" doesn't make it any easier.
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Didn't we have a bunch of 2016 market prediction threads? I definitely remember taking bets. Can anyone find those buried in the forum archives?
Mr Percentage started this prediction thread in early April '16 and the thread ended in mid-July '16: Here it comes--Red Dow (http://forum.mrmoneymustache.com/investor-alley/here-it-comes-red-dow/)
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Of course Sol, you make a good point, picking your appropriate asset allocation is a challenge, or perhaps an abritrary guessing game. When I had meant I approximate the total market, I meant only for equities.
The global bond market is roughly twice the size of the global equities market if I recall correctly, but I am not 66% bonds and 33% equities :)
I don't have any fundamental reason to support market cap weighting of equities, except it's cheap and easy and the products that do it are there.
I have enough concerns about market cap weighting that I tilt to value and size partially for that reason. But I don't think anybody should take my advice, I just picked an allocation a long time ago, and no I'm happy to stick to it.
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A nice chart, though doesn't break up as much as you could Investment Returns By Asset Class, 2016 Year-End Review
(http://cdn.mymoneyblog.com/wordpress/wp-content/uploads/2017/01/2016annual1.gif)
(http://cdn.mymoneyblog.com/wordpress/wp-content/uploads/2017/01/2016annual2.gif)
(http://www.mymoneyblog.com/asset-class-returns-2016-year-end.html)
Bumping this old thread, here is the equivalent asset class returns for 2017 (source (http://www.mymoneyblog.com/asset-class-returns-2017-year-end.html.html)):
(http://www.mymoneyblog.com/wordpress/wp-content/uploads/2017/12/annual2017ret.gif)
Note much different axes
(http://www.mymoneyblog.com/wordpress/wp-content/uploads/2017/12/annual2017ret2.gif)
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Overall my asset allocation did approx. 12% return this year with dividends. My guess is 10% in 2017. I'll try and remember this prediction when I calculate my year end stats.
My AA did a little over 13% this year so similar to last year and better than I predicted.
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I had to do a notarized signature on some rollovers for my wife (as the consenting spouse), but I've never had to do a signature guarantee/notarization on opening other Vanguard accounts, including personal, rollover [when I was single], UTMA, nor 529.
In any case, it's even worth it just to avoid the $45 BS commission, but I found vanguard extremely easy to work with.
Yeah, I was pleasantly surprised. Great customer service. (No I am not affiliated with Vanguard and I'm not selling anything.)
I bank with USAA and they are also amazing, but since they started opening membership to civilians years ago there has been a gradual change...not for the better. They give the HARD SELL on insurance and in house brokerage products now. The "financial advisors" have tried twice to steer me away from mutual funds from other institutions (Vanguard.) Was pretty disappointed because I used to be their biggest fan.
An insurance guy at USAA taught me how to avoid the $45 fee on vanguard funds, you have to set it up as a monthly investment vs a flat purchase. That being said, I funded my IRA at Vanguard directly this year.
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Overall my asset allocation did approx. 12% return this year with dividends. My guess is 10% in 2017. I'll try and remember this prediction when I calculate my year end stats.
My AA did a little over 13% this year so similar to last year and better than I predicted.
dang what is your AA - i thought you were heavy stocks which as the chart above shows did amazingly well across the board. 20+%
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I had to do a notarized signature on some rollovers for my wife (as the consenting spouse), but I've never had to do a signature guarantee/notarization on opening other Vanguard accounts, including personal, rollover [when I was single], UTMA, nor 529.
In any case, it's even worth it just to avoid the $45 BS commission, but I found vanguard extremely easy to work with.
Just call Vanguard. We just dealt with this issue last week. Signature requirements come from the company you are transferring FROM, even though the paperwork still has the space for them. Vanguard has a list of institutions that require the signature guarantee.
Vanguard told us the guarantee was not needed. It was worth a phone call.
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dang what is your AA - i thought you were heavy stocks which as the chart above shows did amazingly well across the board. 20+%
(https://farm5.staticflickr.com/4686/38503863635_474f1e59d9_b.jpg)
I'm 100% stocks, but I live in Canada and the Canadian dollar gained a lot of value this year.
As an example:
VUN [US Total Market in CDN$] = 13.3%
VTI [US Total Market in USD$] = 21.2%
Same underlying investments, but different returns due to currency fluctuations.
Now this isn't all bad as that means:
1. my portfolio in CAD$ is worth more than the same dollar amount was in Jan 2017.
2. 1 CAD$ will buy more imported goods/services, which in Canada is most stuff.
3. I travel a lot in the US so again a strong CAD is useful.
4. eventually the CAD will drop again [say 7%] and when it does it will add that 7% to non-Canadian returns.
CND stocks only did 8.4% this year, but in 2016 they did over 21% when US stocks were lower so the different performance provides some diversification which reduces volatility.
Just part of life living in the Great White North.
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Iterating makes sense
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Love the bar graphs, CanuckExpat. I remember getting annoyed at the total International index fund a year or two ago . . . . glad I just stayed the course!
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How many years in a row does the market have to climb ~20% before people stop fearing the next market correction?
The past nine years have been a modern economic miracle. Whatever little hiccups come next seems likely to be inconsequential in comparison.
Like at this point I feel we could mostly shrug off the type of 40% correction that has always previously sparked serious discussion about the end of capitalism and collapse of western society. Go ahead, take me back to 2015 valuations. No biggie.
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How many years in a row does the market have to climb ~20% before people stop fearing the next market correction?
The past nine years have been a modern economic miracle. Whatever little hiccups come next seems likely to be inconsequential in comparison.
Like at this point I feel we could mostly shrug off the type of 40% correction that has always previously sparked serious discussion about the end of capitalism and collapse of western society. Go ahead, take me back to 2015 valuations. No biggie.
If people are selling appreciating assets because they are in fear, there is always a buyer willing to deal with them.
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How many years in a row does the market have to climb ~20% before people stop fearing the next market correction?
The past nine years have been a modern economic miracle. Whatever little hiccups come next seems likely to be inconsequential in comparison.
Like at this point I feel we could mostly shrug off the type of 40% correction that has always previously sparked serious discussion about the end of capitalism and collapse of western society. Go ahead, take me back to 2015 valuations. No biggie.
If people are selling appreciating assets because they are in fear, there is always a buyer willing to deal with them.
@sol exactly dont have to really "sell for a loss" which everyone always fear mongers about when they talk of paying down a mortgage instead of investing.
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How many years in a row does the market have to climb ~20% before people stop fearing the next market correction?
The past nine years have been a modern economic miracle. Whatever little hiccups come next seems likely to be inconsequential in comparison.
Like at this point I feel we could mostly shrug off the type of 40% correction that has always previously sparked serious discussion about the end of capitalism and collapse of western society. Go ahead, take me back to 2015 valuations. No biggie.
If people are selling appreciating assets because they are in fear, there is always a buyer willing to deal with them.
I'm not selling, but I'm also uncomfortable with all the talking heads so positive about the market, we have lost the wall of worry that the market uses as a ladder to climb.
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BTD, there are still plenty of doomsday "experts" predicting bad things very soon in the "overvalued" stock market. There are believers in both the bear and the bull.
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The only market that will 100% crash in the short term is Bitcoin. Glad MMM finally did a write-up on that gross waste of energy and soon to be people's money.
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The answer is always "buy" until you FIRE and then the answer is always "sell 4% each year." Period.
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Guys. All this talk of hoping for a correction so one can buy cheaper is wrong thinking on many levels. I would discourage it.
Yup. So many examples of people sitting on the sidelines in fear have been posted on this forum in 2016...some for years. The most liberating thing I've learned about investing is that I cannot predict the future so just invest my money in broad market index funds and get on with working on parts of my FIRE plan that I can control like savings/spending and staying healthy so I can actually take advantage of the free time I'm working towards when I do FIRE.
This is why I love MMM. Reminds me of the basics and keeps me focused. Thanks!
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The only market that will 100% crash in the short term is Bitcoin. Glad MMM finally did a write-up on that gross waste of energy and soon to be people's money.
There will be more 30, 40 maybe 50% corrections in the stock market. Diversified portfolios that are properly minded will survive. Crypto currency without a government backing will eventually be restrained and most will collapse. I made a few bucks playing with coins last year. I took profits and now hold cash in USD. What made crypto so popular was the lure of almost free money and lack of any regulations. Its popularity will bring regulations and standards.
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The answer is always "buy" until you FIRE and then the answer is always "sell 4% each year." Period.
That's only if you can't figure out how to sell at the top and buy at the bottom. ;-)
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The answer is always "buy" until you FIRE and then the answer is always "sell 4% each year." Period.
That's only if you can't figure out how to sell at the top and buy at the bottom. ;-)
Don't try to time the markets. That's like feeding a mogwai after midnight. The consequences are dire.
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The answer is always "buy" until you FIRE and then the answer is always "sell 4% each year." Period.
That's only if you can't figure out how to sell at the top and buy at the bottom. ;-)
Don't try to time the markets. That's like feeding a mogwai after midnight. The consequences are dire.
Awe come on White, I've been investing 35 yrs, it took me two years, but after that, I learned to pick the exact low to buy and the exact high to sell. I think I'll right a book on "How to Time the Market". Nah, with all the money I have made timing the market, I should just have it printed and give it away! :-)
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The answer is always "buy" until you FIRE and then the answer is always "sell 4% each year." Period.
That's only if you can't figure out how to sell at the top and buy at the bottom. ;-)
Don't try to time the markets. That's like feeding a mogwai after midnight. The consequences are dire.
Awe come on White, I've been investing 35 yrs, it took me two years, but after that, I learned to pick the exact low to buy and the exact high to sell. I think I'll right a book on "How to Time the Market". Nah, with all the money I have made timing the market, I should just have it printed and give it away! :-)
By Pete, you have committed heresy! It is forbidden on MMM to time the markets. Your penance is to read John Bogle's "The Clash of Cultures: Investment vs. Speculation" three times.
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The answer is always "buy" until you FIRE and then the answer is always "sell 4% each year." Period.
That's only if you can't figure out how to sell at the top and buy at the bottom. ;-)
Don't try to time the markets. That's like feeding a mogwai after midnight. The consequences are dire.
Awe come on White, I've been investing 35 yrs, it took me two years, but after that, I learned to pick the exact low to buy and the exact high to sell. I think I'll right a book on "How to Time the Market". Nah, with all the money I have made timing the market, I should just have it printed and give it away! :-)
Please give it away, because everyone deserves a copy of any book you right.
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The answer is always "buy" until you FIRE and then the answer is always "sell 4% each year." Period.
That's only if you can't figure out how to sell at the top and buy at the bottom. ;-)
Don't try to time the markets. That's like feeding a mogwai after midnight. The consequences are dire.
Awe come on White, I've been investing 35 yrs, it took me two years, but after that, I learned to pick the exact low to buy and the exact high to sell. I think I'll right a book on "How to Time the Market". Nah, with all the money I have made timing the market, I should just have it printed and give it away! :-)
Please give it away, because everyone deserves a copy of any book you right.
I hope everyone realizes my first line,
" That's only if you can't figure out how to sell at the top and buy at the bottom. ;-)"
was a facitious statement, then I expanded on that, when I got a somewhat serious warning about timing the market.
I held on through 2008 and 09, to a loss of $230k, I don't time the market.
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The answer is always "buy" until you FIRE and then the answer is always "sell 4% each year." Period.
That's only if you can't figure out how to sell at the top and buy at the bottom. ;-)
Don't try to time the markets. That's like feeding a mogwai after midnight. The consequences are dire.
Awe come on White, I've been investing 35 yrs, it took me two years, but after that, I learned to pick the exact low to buy and the exact high to sell. I think I'll right a book on "How to Time the Market". Nah, with all the money I have made timing the market, I should just have it printed and give it away! :-)
Please give it away, because everyone deserves a copy of any book you right.
I hope everyone realizes my first line,
" That's only if you can't figure out how to sell at the top and buy at the bottom. ;-)"
was a facitious statement, then I expanded on that, when I got a somewhat serious warning about timing the market.
I held on through 2008 and 09, to a loss of $230k, I don't time the market.
It was quite obvious. IMO. But if you do figure out how to time the market and RIGHT a book I'd like to know how to do both. Unless we're just talking about setting up a book vertically that's got the info to time the market.
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The answer is always "buy" until you FIRE and then the answer is always "sell 4% each year." Period.
That's only if you can't figure out how to sell at the top and buy at the bottom. ;-)
Don't try to time the markets. That's like feeding a mogwai after midnight. The consequences are dire.
Awe come on White, I've been investing 35 yrs, it took me two years, but after that, I learned to pick the exact low to buy and the exact high to sell. I think I'll right a book on "How to Time the Market". Nah, with all the money I have made timing the market, I should just have it printed and give it away! :-)
Please give it away, because everyone deserves a copy of any book you right.
I hope everyone realizes my first line,
" That's only if you can't figure out how to sell at the top and buy at the bottom. ;-)"
was a facitious statement, then I expanded on that, when I got a somewhat serious warning about timing the market.
I held on through 2008 and 09, to a loss of $230k, I don't time the market.
Jeez, someone thought I was somewhat serious about something. I'm losing my edge.
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The answer is always "buy" until you FIRE and then the answer is always "sell 4% each year." Period.
That's only if you can't figure out how to sell at the top and buy at the bottom. ;-)
Don't try to time the markets. That's like feeding a mogwai after midnight. The consequences are dire.
Awe come on White, I've been investing 35 yrs, it took me two years, but after that, I learned to pick the exact low to buy and the exact high to sell. I think I'll right a book on "How to Time the Market". Nah, with all the money I have made timing the market, I should just have it printed and give it away! :-)
Please give it away, because everyone deserves a copy of any book you right.
I hope everyone realizes my first line,
" That's only if you can't figure out how to sell at the top and buy at the bottom. ;-)"
was a facitious statement, then I expanded on that, when I got a somewhat serious warning about timing the market.
I held on through 2008 and 09, to a loss of $230k, I don't time the market.
It was quite obvious. IMO. But if you do figure out how to time the market and RIGHT a book I'd like to know how to do both. Unless we're just talking about setting up a book vertically that's got the info to time the market.
I'm losing it too, I didn't figure out what you meant here, until I reread my post, where I
rote right instead of write. :-)
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There will be more 30, 40 maybe 50% corrections in the stock market.
I sincerely hope that the dips are that shallow. People these days don't remember The Great Depression. Stock market lost about 90% of its valuation over a 2.5 year period and took 25 years to see the same market value before the crash.
This is a graph I've been pondering for a while and wondering what I'd do if I saw a crash like this. This graph makes all of the other corrections seem like child play - mostly because they have been.
https://virtueofselfishinvesting.s3.amazonaws.com/uploads/reports/2017/4675/history_of_market_corrections2-hires.png?link=mktw
Considering most here need ~1M for themselves and their lives (with a spouse)... if this were to happen immediately after FIRE you are for sure going back to work. You're 4% SWR will only get you 4k/year or 2.5 years if you pull the 40k out each year. That cash flow won't last a 25 year depression in our environment. I can live with flat times, even transient dips (on a 5ish year time period - which the vast majority of dips are), but shit man - a 25 year drought might ruin me. I really hope I never see it, but I do acknowledge The Great Depression as the worst case scenario.
As someone else has already pointed out though is that even if the market did correct to 2500 points (can you imagine!!!?!?!?!) that everyone would still have their equity. It would become very important to hold onto as much of it as possible if this happened. Getting a job for another 25 years would for sure be the ultimate goal to try to hold on, but it could be very difficult to secure employment if that happened.
I remember my grandfather not wanting to talk about the depression it was so bad.
Edit to change the photo to a link - it's so large (pixel-wise) that it doesn't format well.
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There will be more 30, 40 maybe 50% corrections in the stock market.
I sincerely hope that the dips are that shallow. People these days don't remember The Great Depression. Stock market lost about 90% of its valuation over a 2.5 year period and took 25 years to see the same market value before the crash.
This is a graph I've been pondering for a while and wondering what I'd do if I saw a crash like this. This graph makes all of the other corrections seem like child play - mostly because they have been.
https://virtueofselfishinvesting.s3.amazonaws.com/uploads/reports/2017/4675/history_of_market_corrections2-hires.png?link=mktw
Considering most here need ~1M for themselves and their lives (with a spouse)... if this were to happen immediately after FIRE you are for sure going back to work. You're 4% SWR will only get you 4k/year or 2.5 years if you pull the 40k out each year. That cash flow won't last a 25 year depression in our environment. I can live with flat times, even transient dips (on a 5ish year time period - which the vast majority of dips are), but shit man - a 25 year drought might ruin me. I really hope I never see it, but I do acknowledge The Great Depression as the worst case scenario.
As someone else has already pointed out though is that even if the market did correct to 2500 points (can you imagine!!!?!?!?!) that everyone would still have their equity. It would become very important to hold onto as much of it as possible if this happened. Getting a job for another 25 years would for sure be the ultimate goal to try to hold on, but it could be very difficult to secure employment if that happened.
I remember my grandfather not wanting to talk about the depression it was so bad.
Edit to change the photo to a link - it's so large (pixel-wise) that it doesn't format well.
I hope we never see losses beyond 50% again. I don't think many jobs will survive that level of dip again. Global war may very well break out if it does now. There could be a push to eliminate people in such a case and war is highly effective at that.
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There will be more 30, 40 maybe 50% corrections in the stock market.
I sincerely hope that the dips are that shallow. People these days don't remember The Great Depression. Stock market lost about 90% of its valuation over a 2.5 year period and took 25 years to see the same market value before the crash.
This is a graph I've been pondering for a while and wondering what I'd do if I saw a crash like this. This graph makes all of the other corrections seem like child play - mostly because they have been.
https://virtueofselfishinvesting.s3.amazonaws.com/uploads/reports/2017/4675/history_of_market_corrections2-hires.png?link=mktw
Considering most here need ~1M for themselves and their lives (with a spouse)... if this were to happen immediately after FIRE you are for sure going back to work. You're 4% SWR will only get you 4k/year or 2.5 years if you pull the 40k out each year. That cash flow won't last a 25 year depression in our environment. I can live with flat times, even transient dips (on a 5ish year time period - which the vast majority of dips are), but shit man - a 25 year drought might ruin me. I really hope I never see it, but I do acknowledge The Great Depression as the worst case scenario.
As someone else has already pointed out though is that even if the market did correct to 2500 points (can you imagine!!!?!?!?!) that everyone would still have their equity. It would become very important to hold onto as much of it as possible if this happened. Getting a job for another 25 years would for sure be the ultimate goal to try to hold on, but it could be very difficult to secure employment if that happened.
I remember my grandfather not wanting to talk about the depression it was so bad.
Edit to change the photo to a link - it's so large (pixel-wise) that it doesn't format well.
You are missing some very important details related to the depression. The main one is dividends. It took only 4.5 years after the bottom to break even with dividends, which would be 7 years from the peak if you went all-in in 1929. The market dividend yield at the bottom was 14%. There was also 18% deflation which made everything cheaper reducing your needed withdraw rate.
Certainly still a very tough economic time, but not as bad as the 25 years you fear. It should be survivable with mustachian adjustments or a more conservative asset allocation than 100% stocks.
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Yes the depression is a bad choice for worst case scenario. Worst case in history was 1966 and the few years around that due to hyperinflation. And even in both those cases sticking to a 4% swr the retirees money still lasted over 20 years and with some minor flexibility it would have lasted forever. By minor flexibility I mean being able to adjust your spending down by 15% or a bit less for a few years or finding some odd jobs to supplement that 15%
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Here is more complete data for 2016 taken from https://www.portfoliovisualizer.com/historical-asset-class-returns:
Inflation 2.04%
US Stock Market 12.53%
US Large Cap 11.82%
US Large Cap Value 16.75%
US Large Cap Growth 5.99%
US Mid Cap 11.07%
US Mid Cap Value 15.11%
US Mid Cap Growth 6.62%
US Small Cap 18.17%
US Small Cap Value 24.65%
US Small Cap Growth 10.61%
US Micro Cap 21.47%
Intl Stock Market 4.65%
Developed Markets 2.45%
International Small Cap 4.17%
International Value 5.05%
European Stocks -0.80%
Pacific Stocks 5.19%
Emerging Markets 11.55%
Cash 0.20%
Short Term Treasury 1.09%
Intermediate Term Treasury 1.19%
10-year Treasury 1.00%
Long Term Treasury 1.21%
Total Bond Market 2.50%
TIPS 4.52%
Global Bonds (Unhedged) 4.02%
Global Bonds (USD Hedged) 6.07%
Short-Term Investment Grade 2.75%
Corporate Bonds 6.21%
Long-Term Corporate Bonds 7.83%
High Yield Corporate Bonds 11.21%
Short-Term Tax-Exempt 0.36%
Intermediate-Term Tax-Exempt 0.09%
Long-Term Tax-Exempt 0.62%
REIT 8.34%
Gold 8.03%
Precious Metals 50.64%
Commodities 10.12%
Same data for 2017:
Inflation 2.11%
US Stock Market 21.05%
US Large Cap 21.67%
US Large Cap Value 16.99%
US Large Cap Growth 27.65%
US Mid Cap 19.12%
US Mid Cap Value 16.91%
US Mid Cap Growth 21.72%
US Small Cap 16.10%
US Small Cap Value 11.67%
US Small Cap Growth 21.78%
US Micro Cap 12.47%
Intl Stock Market 27.33%
Developed Markets 26.40%
International Small Cap 30.12%
International Value 21.25%
European Stocks 26.82%
Pacific Stocks 28.39%
Emerging Markets 31.11%
Cash 0.80%
Short Term Treasury 0.31%
Intermediate Term Treasury 1.59%
10-year Treasury 2.39%
Long Term Treasury 8.60%
Total Bond Market 3.45%
TIPS 2.81%
Global Bonds (Unhedged) 9.45%
Global Bonds (USD Hedged) 4.42%
Short-Term Investment Grade 2.13%
Corporate Bonds 7.06%
Long-Term Corporate Bonds 11.96%
High Yield Corporate Bonds 7.03%
Short-Term Tax-Exempt 1.00%
Intermediate-Term Tax-Exempt 4.55%
Long-Term Tax-Exempt 6.44%
REIT 4.83%
Gold 12.81%
Precious Metals 13.75%
Commodities 3.89%
Interesting to see reversals in outperformance from year to year (small vs large, growth vs value)
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A nice chart, though doesn't break up as much as you could Investment Returns By Asset Class, 2016 Year-End Review
...
(http://www.mymoneyblog.com/asset-class-returns-2016-year-end.html)
Bumping this old thread, here is the equivalent asset class returns for 2017 (source (http://www.mymoneyblog.com/asset-class-returns-2017-year-end.html.html)):
...
And for 2018, here is how things look for a not so good year (source (https://www.mymoneyblog.com/etf-asset-class-returns-2018.html)):
(https://www.mymoneyblog.com/wordpress/wp-content/uploads/2019/01/2018yearend.gif)
(https://www.mymoneyblog.com/wordpress/wp-content/uploads/2019/01/2018yearend2.gif)
The data above doesn't mention it, but cash was the best performing asset class for the year.
More detailed data from https://www.portfoliovisualizer.com/historical-asset-class-returns:
Inflation 2.24%
US Stock Market -5.26%
US Large Cap -4.53%
US Large Cap Value -5.55%
US Large Cap Growth -3.46%
US Mid Cap -9.34%
US Mid Cap Value -12.55%
US Mid Cap Growth -5.71%
US Small Cap -9.43%
US Small Cap Value -12.34%
US Small Cap Growth -5.80%
US Micro Cap -17.12%
Intl Stock Market -14.44%
Developed Markets -14.46%
International Small Cap -18.52%
International Value -14.66%
European Stocks -14.89%
Pacific Stocks -13.98%
Emerging Markets -14.71%
Cash 1.81%
Short Term Treasury 1.35%
Intermediate Term Treasury 1.00%
10-year Treasury 0.99%
Long Term Treasury -1.90%
Total US Bond Market -0.13%
TIPS -1.56%
Global Bonds (Unhedged) -4.06%
Global Bonds (USD Hedged) -0.46%
Short-Term Investment Grade 0.86%
Corporate Bonds -3.79%
Long-Term Corporate Bonds -5.95%
High Yield Corporate Bonds -2.96%
Short-Term Tax-Exempt 1.53%
Intermediate-Term Tax-Exempt 1.18%
Long-Term Tax-Exempt 0.90%
REIT -6.11%
Gold -1.94%
Precious Metals -10.79%
Commodities -13.88%
Markets give, markets take :)
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Just checked VTSAX for it's gain this year.
It's up about 12% plus another 1.82% of dividends.
If you had your $1M in VTSAX and spent $40,000,
your portfolio still has and extra $90,000.
May the good times continue.
What a Revolting Development.
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What a Revolting Development.
I don't think that graph is total return. When you factor in dividends and price change, $10,000 invested in VTSAX on 12/31/2016 would be worth $11,490 on 12/1/2019. Is that roughly 7% annual return, if I am doing my math right? Nothing to sneeze at
(https://i.imgur.com/mbyJgvU.png)
($10,000 in equivalent international fund, or total US bond fund would be worth $10,914 and $10,353 respectively over the same time period)
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Ya, I see the glass can be half full :-)
I was retired (as in no more work income) by Hurricane Michael on Oct 10th.
(business totaled)
Since then, my total portfolio is down about $150,000, so the timing is not great for retirement.
However, the glass really is half full, in that we over saved, I can collect SS anytime I want to,
and my wife is just a few years behind me, so sequence of returns should not be a problem.
It was just a lot more fun watching the market when it was going up. :-)
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I accidentally protected my investments a little when I did my regular rebalancing in December, so I'm still ahead by 6.8% during this Bear Market. That's pretty close to 7% so nothing has really happened to be honest. And I'm not planning to retire for at least another 8 years (at the earliest) so whatever.