Sad time for investors

LLL wrote:

Flagpole

There is no bad time to be in the market.

MOSTLY you are preaching to the choir with that. If you're within 5 years of retirement and you have more than enough to live a good life on in bonds or CDs or some other non-market investment that brings next to nothing and you just don't want the risk at all of stocks, then ok. For anyone else though who is 5+ years away from retirement, then I'll agree...never a bad time to be in (and the haters can't use hindsight here...you never know what will happen, so you need to be in unless you hit the criteria I mentioned).

Who said I'm primarily in US large caps? That's just a portion of my portfolio. I have about 25% international stocks, small and mid caps too, plus some other things. I never said I don't invest in emerging markets.Besides, I wouldn't call what I do "buy and hold". I do primarily buy and hold, but when there are BIG drops in the market (like we had in 2008, I put more in...I have gained TREMENDOUSLY by doing this, and it is NOT timing the market, because I am always in...just when it appears stocks go on sale and I have more to invest, I do). Sometimes it takes a while to reap the benefit, but I always do. I bought extra stocks in 2008 and 2009 from 12,000 to 10,000 to 8,000 to 6,800 in addition to my regular purchases that took me all the way to 6400.

Off the Grid wrote:

Flagpole wrote:

Might seem like it, but in practice, at least for me, it has been WAY better than that. All my dividends are reinvested, and I've seen a HUGE increase since 2000.

with div reinvested, the S&P500 is up 2.8%/yr since 2000. It is actuarially impossible for you to be up significantly from this and still be invested primarily in US large caps. fixed income 5-7%, Gold has been a good one, and emerging markets if you got the timing right. You claim none of these as investments in any meaningful size.

But there is no way a buy & hold strategy has done better than 3-4% since 2000. To claim otherwise is an obvious lie.

CORRECT!Precious metals are the only sector you mentioned that I do not own. They've done great since 2000, but my philosophy doesn't allow for them in my portfolio...just too risky.

Flagpole wrote:

Blowing.Rock Master wrote:

While you might not want to admit it, you were lucky that the bulk of your disciplined investment program occurred during the longest bull market in US history.

Simply not true. Many people (yourself included) keep talking about how people have hardly made anything the last 10+ years. I've done VERY well since 2000. While the 90s were quite good, my investing has made it possible for me to retire now at age 60 and perhaps as early as 55. Prior to 2000, I was planning to retire by 65.

I'd like to know what you're in then. I've been in an index fund since 2000 and I'm only up maybe 15% over that period. That's pretty f*cking bad - could've done as well in CDs with a lot less risk/volatility. No more stock market for me.

Flagpole wrote:

But there is no way a buy & hold strategy has done better than 3-4% since 2000. To claim otherwise is an obvious lie.

If you bought the long end of the treasury yield curve, I think you would have been very happy with buy and hold

Flagpole wrote:

agip wrote:

the 'volatile going nowhere market of the last 13 years' is a myth.

CORRECT!

A chart of the "myth" can be found here:

The S&P 500, which represents 70% of the US stock market, opened 2000 at 1,469.25. It closed yesterday at 1,485.98. In 13 years the S&P 500 has risen a grand total of 1.14% for an annual growth rate of 0.09%.

Agip is correct that if you got lucky and picked the right stock or sector in January 2000 you could have done quite well, but he didn't say that if you picked the wrong stock or sector you could have gotten killed. Anyone who bought QQQ in January 2000 still has a loss of 26% after 13 years.

Buy and Hold has been a crappy strategy since 2000.

Sorry but I have to point out 2 comments you made that are inconsistent with the strategy that you always preach.

"...you never know what will happen...

While I wholeheartedly agree with this statement, this contradicts your investment philosophy. You tell people they should be in the stock market because in the long run the stock market will go up. In other words, you're saying you do know what will happen.

"...but when there are BIG drops in the market (like we had in 2008, I put more in...I have gained TREMENDOUSLY by doing this, and it is NOT timing the market, because I am always in...just when it appears stocks go on sale and I have more to invest, I do)."

This IS market timing. When you see a big drop you buy more than you normally do. What do you think market timing is? The only difference between this and trend following is that OTG and I are using indicators to help us select buy (and sell) points while you're guessing. But this is still contrary to what you always tell people.

What are the total returns if someone reinvested their dividends in a S&P 500 index?

While it is true that you can pick a time frame from a bubble until now and show that returns aren't that great but to try to time the market you have to be right twice - once to get out and once to get in. That is hard to do with any precision.

Blowing.Rock Master wrote:

Flagpole wrote:

CORRECT!

A chart of the "myth" can be found here:

http://tinyurl.com/bj6b3p8

The S&P 500, which represents 70% of the US stock market, opened 2000 at 1,469.25. It closed yesterday at 1,485.98. In 13 years the S&P 500 has risen a grand total of 1.14% for an annual growth rate of 0.09%.

Agip is correct that if you got lucky and picked the right stock or sector in January 2000 you could have done quite well, but he didn't say that if you picked the wrong stock or sector you could have gotten killed. Anyone who bought QQQ in January 2000 still has a loss of 26% after 13 years.

Buy and Hold has been a crappy strategy since 2000.

__

we all agree that for the most part, large caps have only kept up with inflation since 2000.

But you are being unwise to say "if you got lucky and picked the right stock or sector in January 2000 you could have done quite well" as if owning a diversified portfolio is luck. It isn't. I don't rifle shot sectors, hoping to be right. I shotgun it, owning everything, so if one (like big caps 2000-2013) craps out, you still have emerging markets or small caps, which are up 7-10% per year over that period.

The problem here is calling the SP 500 'the stock market.' It isn't. it is controlled by around 30 enormous stocks, and that makes it a poor representation of teh stock market.

lllllllll wrote:

What are the total returns if someone reinvested their dividends in a S&P 500 index?

2000-2013 VFINX 2.8%

agip wrote:

But you are being unwise to say "if you got lucky and picked the right stock or sector in January 2000 you could have done quite well" as if owning a diversified portfolio is luck. It isn't. I don't rifle shot sectors, hoping to be right. I shotgun it, owning everything, so if one (like big caps 2000-2013) craps out, you still have emerging markets or small caps, which are up 7-10% per year over that period.

The problem here is calling the SP 500 'the stock market.' It isn't. it is controlled by around 30 enormous stocks, and that makes it a poor representation of teh stock market.

allocating 100% to these sectors. a few sectors that have underperfomed in this period

financials

home builders

tech

there is a reason SPY is 70% of the market....it IS the market.

Even w/ 25% (as Flagpole suggests) in other markets, that is 25% * 10% + 75% * 3% = 4-5%/yr. That is pretty good, but a static allocation such as this is concentrated and exposed.

Flagpole's suggestion that he bought more in 2008. How much more can you add? I'd reckon 5% to a portfolio. Ok, so you have 5% of your portfolio w/ a cost basis that is 50% of the rest of your holdings. That is a 50% additional return on an extra 5%, which is 2.5%, and annualize that over 10 yrs and you have 0.2%.

So again, I will be generous and suggest that you are not accounting for contributions correctly. I suggest you read up on "time weight vs dollar weighted returns".

Well I don't recommend putting 75% of your holdings in the SP 500. So your commentary is not effective against my argument. Maybe against Flagpole's it is effective.

I pretty much try to avoid what I call the 'Vanguard Problem" which is market cap weighting.

To the point, for US exposure, I would have something like 1/3 small cap 1/3 midcap and 1/3 large cap. Treating them equally, not massively overweighting large caps like you are proposing.

And the US is only, say, 40% of my stock exposure. etc.

So the SP 500 to me is maybe 20% of a total portfolio that includes bonds and metals and real estate, etc. Not 75%.

The cost to the strategy is that sometimes large cap US is the best place to be, and my returns suffer then. Say, 1995-1999. Small caps did nothing those yrs.

To repeat: the SP 500 IS NOT THE MARKET. It is dominated by 30 or so huge companies. It is not the market. It is not the market.... it...is....not....the....market...it..is....

just to hammer home the point:

Don't believe the marketing message that the SP 500 and market cap weighting makes sense for investing. It is just one way to invest.

Many indices are right now at all time highs - small cap, midcap, transports, etc. And others, like REITS are practically there but for a short spike in the housing bubble.

These are all completely investable through ETFs and mutual funds.

Flagpole wrote:

bangalangadanga wrote:

flagpole, weren't you saying the market was overpriced.

http://www.letsrun.com/forum/flat_read.php?thread=4817929

Well, thanks for pointing that out. When I made that call, on Sept. 20, 2012, the Dow was at 13596.93. I predicted a short-term drop, and it then dropped more than a thousand points to 12542.38 by Nov. 15, 2012.

Here's my quote from the first post in the thread you referenced - "The stock market currently is...over priced. Do with that info what you will, but there's enough bad short-term info out there right now to warrant a big pull back soon."

I would consider a >1000 point pullback within less than 2 months to be a big short-term pullback, just as I predicted.

We've slowly climbed back out, and now today with the Dow at about 13,500, I'm saying it will likely go higher now pretty strongly for a while. Time will tell.

"...just as I predicted".

In that thread, you were asked to clarify what "big short-term pullback" meant, so you couldn't just randomly claim you were right (as you are now). You failed to do so.

1000 points is a "big" pullback? That's less than 10%. Actually, a 7.75% drop. That magnitude of pullback has happened EVERY SINGLE YEAR for the last 10 years. Probably longer, but I got bored after 10 and didn't look further. WOW. What a prediction man! You really nailed that one.

"will likely go higher now pretty strongly for a while". Wow, another great specific prediction.

Nostradamus lives.

I find it odd that you are so interested in my returns. Trust me brother, I know how to calculate returns, and I do NOT count contributions (reinvested dividends are NOT contributions). I'm not about to give you the size of my portfolio, but I have never made enough money to get it to where it is by simply putting a lot in...it's all in the returns...almost exactly 11% annually now (actually a LITTLE bit better than that) on average since 1989. And honestly, while I'm stoked about that, there are a LOT of people who passively invest like I do who have done better than me since then.Also, when I put in extra money (when I have it) in the stock market after a big pullback, that is NOT market timing in my opinion. For one thing, I have a constant percentage of my income that goes in the market regardless of what it does, and secondly, I have not yet ever taken any money out of the market. Market timers put LARGE sums of money in the market at certain times and take it out when they think it is high. I do not operate in that manner. I simply invest more if I can, and if the market has dropped a lot recently, I may pull the trigger then. That's NOT market timing.

I'm not sure why he's harping on the S&P 500. It made 13% in 2012 which was a good year. I was up EXACTLY 18% in 2012. Pretty typical for me, to do better than the S&P 500 and I just invest mostly in the most common funds in Vanguard and Fidelity plus one with American Funds. It's not rocket science.

Um...yeah, but I called it exactly when the pullback began. Pretty right on. Besides, a 1000 point loss in 2 months is big. At least I say it is.

For one thing, I've been in a LOT of different things since 2000. I haven't just held the same exact funds since then...though I do have SOME of the ones I've had since. I change things up once or twice a year.Don't let the naysayers tell you that it can't be done.Here are some 10 year track records for some of Fidelity's funds:Artisan Mid Cap Fund Investor Class - 10.97%Fidelity® Contrafund® - Class K (large cap by the way) - 9.75%Fidelity® Diversified International Fund - Class K - 8.89%Fidelity® Small Cap Discovery Fund - 12.46%Here are some Vanguard ones for the last 10 years:Vanguard Extended Market Index Fund Investor Shares - 10.58% Vanguard Small-Cap Index Fund - 10.83%Energy - 14.64%International Explorer - 12.05%Capital Opportunity Admiral Shares - 11.11%Mid-Cap Growth - 10.44%You can do the research on the track record of these funds. Buy an extra fund once in a while (which is what I do) if there's noise that it might do well. I don't usually get completely out of a fund, but I will move SOME money out of one on occasion. Usually to be more diversified, I just buy another fund.It's really a simple recipe.1) Get out of debt (except for a house initially) and stay that way.2) 15% or more into good growth stock mutual funds.3) Put more money in if you can or pay the house off early.4) Retire with NO debt at all including a paid for house, and live well on the money that grew.Money in every two weeks like clockwork and don't try to time the market, BUT if you have extra and there's a big pullback, it's OK to put money in then if you don't need it then as long as you ALWAYS are already putting in 15% or more of your income.

Distance Maniac wrote:

Flagpole wrote:

Simply not true. Many people (yourself included) keep talking about how people have hardly made anything the last 10+ years. I've done VERY well since 2000. While the 90s were quite good, my investing has made it possible for me to retire now at age 60 and perhaps as early as 55. Prior to 2000, I was planning to retire by 65.

I'd like to know what you're in then. I've been in an index fund since 2000 and I'm only up maybe 15% over that period. That's pretty f*cking bad - could've done as well in CDs with a lot less risk/volatility. No more stock market for me.

Flagpole. Try reading your own advice. You have been saying that most people SHOULD be out of the market. So why the sarcastic, smart alec post? Especially when you know the stock market is being artificially propped up at the expense of wage earners and people who rightfully should have their savings in checking and savings accounts. Tell me what you think the outlook for the stock market would be if the target interest rate by the Fed was an entire 3 percentage points higher as it should be (which would still be relatively low) and we had gone over the fiscal cliff.