Put all your eggs in one basket with investing?

[Pablo]

We all know when you get older money seems to disappear quickly..
You better be prepared.
Half the time your kids do you in unfortunately I've seen it many times.

Kinda sorta

The budget stuff seems to run under..........even our vacations are costing less. It's the unexpected stuff...........budget for unexpected stuff!!

 

[nate379]

All depends. Once you retire, some portion of the money ought to be put into lower risk (and thus lower growth), that way if the market has a downturn and then stays stubbornly down, you don’t wind up with “buying high and selling low”. The more you have, the more you can leave in aggressive growth, the less you have, the more you need to safeguard.

Usually the advice is about 4% withdraw rate in retirement, but I’m not sure what diversification that is, what percentage of stocks to bonds, or aggressive vs non-aggressive growth stocks. Usually people like to think they will get 40% of their income from SS, but in reality, it’s up to 40% and above a certain income level, SS bend points are hit—and of course, there’s all sorts of doom and gloom about SS benefits going down in the future. That aside, that’s where the usual advice for 10 years income in retirement savings comes from: 10 years income, times 4%, is 40% of that income, plus 40% from SS, makes up 80% of your preretirement income, which somehow is ok in retirement, as somehow the pundits believe retirees don’t do as much in retirement. [If that doesn’t sound like what you’d want, you can start to think about how much you want to save so as to afford the retirement that you want.]

"They" claim needing 2 million to retire.⁹

4% withdraw would be $80k! Plus SS, disability, etc, etc.

Maybe that works for the rich, but I don't make that now and cover about ~$40k a year between retirement, savings and mortgage.

And if it's earning 9%, then the money never reduces... so you die with over 2 million?

I intend to die with near 0.

 

[nate379]

Kinda sorta

The budget stuff seems to run under..........even our vacations are costing less. It's the unexpected stuff...........budget for unexpected stuff!!

I hear you. Last vacation I took was a weekend in 2003 to Lotte World.

I'd much rather be at work, or work on projects at home than vacation.

 

[Astro14]

"They" claim needing 2 million to retire.⁹

4% withdraw would be $80k! Plus SS, disability, etc, etc.

Maybe that works for the rich, but I don't make that now and cover about ~$40k a year between retirement, savings and mortgage.

And if it's earning 9%, then the money never reduces... so you die with over 2 million?

I intend to die with near 0.

You've not been through a down market? Where 20%, or more, was lost year over year? Where an index lost over half its value (I'm looking at you, NASDAQ) in a month?

"They" have been through that.

The 4% rule is based on a balanced portfolio, accounts for inflation, and accounts for market downturns. "They" have run the analysis of getting money to last for 35 years.

Nothing pays 9% with a guarantee, and looking at historic returns on stock indices at about 9%, you are looking at an average, and your plan must account for market downturns, because they will happen.

"The money never reduces"?? Where did you get such a notion? It can, and most certainly, will "reduce" in a market downturn.

So, let's take a hypothetical scenario, using your example and numbers. You need $40K, and you plan a portfolio return of 9%, so, your plan, since it "never reduces" is to amass $445,000 and take out 9% per year.

But what if year one looks like 2008 - the financial crisis, and the market lost 36%.

Your portfolio drops to $284,000. You take out your $40K.

You're now looking at a balance of $244,000. So, your 9% is now $22,000. With no guarantee that the market will return 9% next year, either.

Welcome to the poor house, you are in a downward spiral from which you can never recover.

 

[bovine1]

Concentration is great if the stock and timing are right. It's a very risky strategy. I've been investing since 1982. I've had big winners and some that went worthless. I'll stick with diversification myself. Nice reasonable returns in the long term. I traded commodities for 30 years but I kept positions small and mostly spread traded. If you're only in 1 stock and it goes down 50% will you panic and sell? If so it'll take you years to just get back even. Just my thoughts. Good investing to all.

 

[Dave Hess]

I day trade 6 months on and off. I go at it hard and have done over 750 trades in one month.
It can really wear on you. I flip and I do what I do best. I don't care about long term or dividends.
I have a buddy in TN and we will be on the phone most days working it. He has his own approach.

My business is cranking right now so I am on a respit. In the meantime I am happy collecting brokerage interest.
I don't deviate from my system. I'm good at it and happy with the success. Once you fall into the groove, why fight it?

What were your gains in that month you had 750 trades ?

Did you need to see a physical therapist for Carpal Tunnel Syndrome after doing so many trades ?

 

[Pablo]

What was your gains in that month you had 750 trades ?

Did you need to see a physical therapist for Carpal Tunnel Syndrome after doing so many trades ?

Can’t comment on that but when I first started trading it was $50 trade!

 

[Dave Hess]

Can’t comment on that but when I first started trading it was $50 trade!

What year was that ?

 

[Pablo]

What year was that ?

1980 or so

 

[Hermann]

So, this $16+ thousand is play money? Not investment money? And the 401(k) is where you invest?

Or, are you in/out quickly in both?

This looks more like entertainment/hobby trading than serious investing. How old are you?

Let me ask you this: If I took your annual income, multiplied it by your age/10, would you say that your portfolio is larger or smaller than that?

In other words, a 40 year old should have about 4 times their income in their portfolio, or better.

My 401K is actively managed by yours truly. I take my profits, as Jim Cramer once said, You never lose money taking your profits. Then I can take a break from watching the market so much. Still look at the futures early and check in 11am and 2pm or so, to see wassup. My Merrill Account is kind of a play fund, but I don't let stuff stagnate and I have made money. Gives me something in to get me out of bed early. No need for more risk taking than I am doing. My returns have been above average in my world. My money overseas in Ireland is making well over 6% on average. Has been as high as 10% in recent years. The 401K has averaged over 8% for the last 5 years. One bad year held that down a bit. The interest on my CD's at Bank of America pays for all of my home insurance and taxes. Almost covers all my auto insurance also. I have instant access to about 20K for emergencies.

My portfolio is above that calculated amount by about 60%

my age is 69.5

 

[Hermann]

"They" claim needing 2 million to retire.⁹

4% withdraw would be $80k! Plus SS, disability, etc, etc.

Maybe that works for the rich, but I don't make that now and cover about ~$40k a year between retirement, savings and mortgage.

And if it's earning 9%, then the money never reduces... so you die with over 2 million?

I intend to die with near 0.

If the stars align right my last check will bounce.

 

[PandaBear]

It all depends on your risk tolerant.

If you have no living expense, you can wait forever, and you can weather the risk of something going to near zero and rebound after 10 years, then maybe it is ok to put all your eggs in 1 baskets for 80 years.

Most people do not have such a high risk tolerance, and they would rather the investment drop at most 30%, so they would rather have 100 investments that would average to no more than +/-20% per year, even if they are not making maximum gain they will not take maximum loss.

Hence, the 'general' advices are to diversify.

 

[Zee09]

What were your gains in that month you had 750 trades ?

Did you need to see a physical therapist for Carpal Tunnel Syndrome after doing so many trades ?

I'd have to go back and dig it up. Right now I'd only be guessing.

I use a cell for instant access to trading so it isn't a big deal. My average monthly trades are around 250 to 300 a month when I do trade.

Only my accountant looked at me weird when I did the massive trade month...lol

In the midst of that trading I would see number wheels in my sleep and harmless things like clocks and gas pumps with spinning numbers would set me off..lol
Atleast they were going up...

Thus the 6 month sabbiticals.

 

[Zee09]

Kinda sorta

The budget stuff seems to run under..........even our vacations are costing less. It's the unexpected stuff...........budget for unexpected stuff!!

The wealth.... YOU...
I use the stock market to help pay for life's luxuries.
When in Florida I like to flip to pay for the vacation etc. It really doesn't as I leave the money in the brokerage account but that is the game I play.
Makes it entertaining.

 

[ArrestMeRedZ]

You've not been through a down market? Where 20%, or more, was lost year over year? Where an index lost over half its value (I'm looking at you, NASDAQ) in a month?

"They" have been through that.

The 4% rule is based on a balanced portfolio, accounts for inflation, and accounts for market downturns. "They" have run the analysis of getting money to last for 35 years.

Nothing pays 9% with a guarantee, and looking at historic returns on stock indices at about 9%, you are looking at an average, and your plan must account for market downturns, because they will happen.

"The money never reduces"?? Where did you get such a notion? It can, and most certainly, will "reduce" in a market downturn.

So, let's take a hypothetical scenario, using your example and numbers. You need $40K, and you plan a portfolio return of 9%, so, your plan, since it "never reduces" is to amass $445,000 and take out 9% per year.

But what if year one looks like 2008 - the financial crisis, and the market lost 36%.

Your portfolio drops to $284,000. You take out your $40K.

You're now looking at a balance of $244,000. So, your 9% is now $22,000. With no guarantee that the market will return 9% next year, either.

Welcome to the poor house, you are in a downward spiral from which you can never recover.

What Astro is describing is known as Sequence of Return risks. You are taking out a constant dollar amount, so to meet that quota you have to sell more shares of stock when it's down than when it's up. It has the same effect as dollar cost averaging, but in the wrong direction. Obviously, if you are selling more shares when the price is low you are, in effect, "buying high and selling low".

Another huge risk factor is inflation. If I retired in 1973 in Los Angeles I could live on $10k a year. Twenty years later in 1993, it would take five times that much, and my diet would be pretty much red beans and rice. IMO, inflation has killed the lifestyle of retirees more than the next three factors combined.

 

[Dave Hess]

Many retirees are headed back to a job with the excuse they got bored at home.

In reality they didn’t have enough saved and were broke.

I don’t want to be collecting shopping carts at Walmart or a Chipotle burrito maker when I’m 70 years old.

 

[John105]

If mediocrity is matching the return of the Wilshire 5000 over 40 years, I'll take mediocrity all day long... I am long term bullish on America.

It took me 20 years to actually join Bitog.

I probably should have joined Bogleheads by now as well.

It’s easy to criticize people who haven’t got your resources, like a person who is 50 with 3 mil in retirement. Mediocre. Because I have 35,000 million

Bogle never was snooty like that. He said, “Three out of four money managers can’t beat the index. Why pay them to try.”

My wife met him multiple times at the work cafeteria and he was a pretty humble man. Liked to be around the employees.

You’re not likely to have his and hers 911’s if each spouse saved 3 mil by 50. But you shouldn’t have to eat gruel and pebbles either.

 

[Astro14]

It took me 20 years to actually join Bitog.

I probably should have joined Bogleheads by now as well.

It’s easy to criticize people who haven’t got your resources, like a person who is 50 with 3 mil in retirement. Mediocre. Because I have 35,000 million

Bogle never was snooty like that. He said, “Three out of four money managers can’t beat the index. Why pay them to try.”

My wife met him multiple times at the work cafeteria and he was a pretty humble man. Liked to be around the employees.

You’re not likely to have his and hers 911’s if each spouse saved 3 mil by 50. But you shouldn’t have to eat gruel and pebbles either.

Everyone should read his book “common sense on mutual funds”. The essential thesis is this, index funds beat over 90% of the actively managed funds.

In fact, index funds are somewhere around the 95th percentile of all returns.

If you scored 95th percentile on your SAT, you would be thrilled.

You should be equally thrilled to get 95th percentile returns on your investment.

 

[Pablo]

The wealth.... YOU...
I use the stock market to help pay for life's luxuries.
When in Florida I like to flip to pay for the vacation etc. It really doesn't as I leave the money in the brokerage account but that is the game I play.
Makes it entertaining.

Opulence

 

[JeffKeryk]

@The motor guy what @Astro14 is talking about in #104 will happen; which is precisely why you don't put all your eggs in one basket. Diversity and time are the key components in building wealth.

I actually look at investing and wealth differently; my methodology is contingency planning. What if, what if and what if. After many years of being broke and homeless, I had to change and knew I had little time left to do so. I had to narrow down my priorities. Housing was #1. Wheels to get to work and school. Long term investing, starting simply and adding investment products (and education) as things permitted.

Forget the short term; it's just a blip on the radar. Yeah, we live in the short term, but if short term big gains really worked, everyone would do it. Where do you wanna be when you are 60, 70 or ??? I have been on both sides of money and I can tell you it is a lot better to be the one who can give a little than to be the one who needs a little.

I wish you luck.