Down goes the Dow

Nope. Don't have a budget.

Live below our means and cash flow is not an issue.

I understand that we are fortunate and I don't take it for granted, meaning I know that others do not have the same opportunities and returns.

But again, spending and buying things beyond that which is necessary has no interest to me or my spouse. So there's funds there and I don't need to budget.

How about you?

Edit: Perhaps a better way to put this is that since we have grown accustomed to living as if we were on a budget, the need to create an actual budget has not been necessary.

Yessir. Not in the sense that we have a set dollar amount that we're not allowed to exceed every month but I definitely track all our spending and know what we need to cover bills, groceries, and running shoes for the next year. I'm about 99% sure that most people on this thread bring home significantly more money than I ever did so while I'm not poor I would never have had the confidence to retire early without crunching a lot of numbers and knowing exactly how much we would need and where it would come from.

Nice.

The sophisticated budgeting tools definitely make responsible planning easier, and from our experience, instill a real sense of confidence.

When we bought out house years ago, we were budgeting like crazy, and we were doing it on a financial planning program - Quicken. Intuitively, we didn't think we could afford to buy, but laying out the numbers on the program showed it was doable, so we took the leap. It was a wise decision but no way we would have done it without a sophisticated tool to spell out the details.

The other thing is that while the markets are good, I don't fool with things like bonds and CDs, so anything not invested is just left to sit in a bank account.

“Recall that the S&P 500 lagged Treasury bills from 1929-1947, 1966-1985, and 2000-2013. 50 years out of an 84-year period.”

—John Hussman, January 2022

Thanks for your continued support, Igly. Here’s the actual quote.

Something unintuitive about the way gains compound over time makes risk-free (i.e., stable, not varying year after year) investments demonstrably better than those that vary over time but with the same average annual gain. For example, a stock that produces average annual changes of +5%, with individual yearly changes ranging between, say, -15% and +25%, will grow less over time than treasuries paying 5%.

I realize that will seem like it doesn’t make sense, but it can be demonstrated fairly easily if anyone is curious.

Also, when one is is decumulation mode, say in retirement, the downside risk (i.e., going broke) is exacerbated by early bad years.

If its more important to avoid ruin than to maximize gains, as may be the case for a retiree hoping to enjoy the whole sprint all the way to the finish line, it’s a good idea to reduce risk (i.e., fluctuations in annual gains) and accept somewhat lower gains for the benefit of significantly lower chance of running out of money.

$0.02 for my retirement fund please 🙂

Here’s a simple illustration of the first point I made above.

Imagine you start with $1000 and earn 25% per year for two years. After two years you will have $1562.50.

Now imagine you earn 0% in year 1 and 50% in year two, giving an average of 25% per year. In this case you have $1500 after two years, or $62.50 less than with uniform 25% per year. Note you get the same result if you change the order, earning 50% in year 1 and 0% in year 2.

I won’t bother to show more complicated examples, but can say with confidence that in all cases you will get the best result for uniform annual gains, when compared with any other variable set of changes with the same average annual change.

$0.04 now please 😀

The big difference is that, in comparing avg. stock market gains (i.e.: index fund) against treasuries, the avg. annual returns of the stock market have been higher than the fixed rate of the treasuries, so that the stock market has outperformed treasuries historically. And it has been enough higher to make up for the phenomenon you have noted above.

Igy won't want to see this ...

l.smartnews.com

This Stock Market Indicator Has Been 100% Accurate Since 1957. It Signals a Big Move in the S&P 500 in 2024. (The Motley Fool)

In January 2022, the S&P 500 (SNPINDEX: ^GSPC)tumbled into a bear market amid the fiercest inflation in 40 years. Sentiment continued to crumble as the Feder...

Open link

SP500 YTD +3.95%

average SP500 stock YTD: -0.3%

Either an argument for market cap weighting or an argument against it.

I'm not sure. Either way.

Iggy how do you feel about The Bitcoin making it above 52k?

I had a limit sell at just under 35k but it expired in 24 hours. It almost brushed the sell but didn't hit. Thank god.

I feel like a schmuck again, I never pumped into risk at the lows. I had aspirations to buy MSFT and some more crypto but never did. Current allocations:

iBond - 2.7%

Crypto - 37.5%

Stock - 12.8%

Cash - 47%

I wish that bitcoin was not such a train wreck environmentally. Would like to nibble at it but my conscience is fighting me on it. Crypto just uses ungodly amounts of power to "mine" it.

HSGFX has lagged T-Bills since 9/30/2005! It will lag T-Bills forever unless the US Stock Market goes to zero or it transforms into a shadow equity index fund.

Ipad CR, Kris Abdelmessih has a post explaining this. (I believe you should follow him, he's a math nerd like you).

moontowermeta.com

The Volatility Drain - Party at the Moontower

editor

I don’t want to torment you this week, but if you trust me play along and you’ll be paid off with some non-obvious lessons. Imagine the wish you made on your 10-year-old birthday candles comes true. You are magically given $1...

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Something from his post for others to ponder;

"A recollection from the dot com bubble. Market watchers like to say the
market was inefficient. The options market would disagree. Stock prices
and volatilities were extremely high reflecting the fact that nobody
understood the ramifications of the internet. Had you looked at the
option-implied distributions is was not uncommon to see that a $250
stock had a modal implied price of $50. To be hand-wavey about it, the
market was saying something like “AMZN has a 10% of being $2050 and a
90% chance of being worth $50.” In other words, if you bought AMZN there
was a 90% chance you were going to lose 80% of your money."

Bitcoin could go to a $million and I would have no regret. Nonsense.

HSGFX performance has zero to do with periods that T-Bills have outperformed the S&P 500.

If bitcoin goes to a million I will have no regrets either.

Oh, and I am invested in HSGFX for the 1% up yesterday

Of course you are.

What was it that P.T. Barnum said?