Annuities?

[Xan]

You can (and do) make all those arguments, but you don't get to say that people who disagree are blindly thinking that "this time will be different". It's just a matter of timescale.

[Libertarian666]

i am a big believer in plan around what was , what is and what stands a reasonable chance of continuing then leave slack in the plan .

we can paralyze ourselves with our own visions of every negative thing that can happen and hurt ourselves for really no reason . the biggest obstacle to our own financial success is believing our own bull-shit that we envision in our heads.

my brain pounded me nightly about every negative that could happen when it came to buying in to the real estate partnership i did . i almost did not go through with committing almost 500k to the deal . I fought my brains visions and 15 years letter it was an incredible investment .

If it had turned out badly, you wouldn't think the same way about it.

In other words, just because something turns out well, that doesn't necessarily mean it was a good decision at the time.
Of course the reverse is also true: just because something doesn't turn out well, that doesn't mean it was a bad decision at the time.

[jhogue]

i am a big believer in plan around what was , what is and what stands a reasonable chance of continuing then leave slack in the plan .

we can paralyze ourselves with our own visions of every negative thing that can happen and hurt ourselves for really no reason . the biggest obstacle to our own financial success is believing our own bull-shit that we envision in our heads.

my brain pounded me nightly about every negative that could happen when it came to buying in to the real estate partnership i did . i almost did not go through with committing almost 500k to the deal . I fought my brains visions and 15 years letter it was an incredible investment .

but i learned a long time ago our brains hate losing money more than it likes making money so it will pound you with every negative it can think of .

because stocks went up for 150 years do i think they will go up forever ? well thinking the end was coming certainly would have left you alot poorer to date . certainly i see them going up in my lifetime

at this stage i am fine with 50/50 in retirement and there is plenty of slack in our plan but i certainly won't hide under a rock because of things i can imagine happening .

mathjak,

Why do you keep saying you are 50/50?

We all know you have cash.

[mathjak107]

i mean if you want to get technical it is 50/47.5/2.5.% cash at the moment . but i don't count the cash as part of the models i use since the cash is outside and separate from my investing models. .the cash held for spending is treated like my art work and and real estate . it is all part of our net worth but they are not part of our investing models.

i don't break out my 50/50 in to including art work and real estate as part of the 50/50 . .

the only time i would count the cash is if it was part of the models themselves as an integral part of the portfolio because we held a cash position temporarily for redeployment . like in the pp , that would count as cash in the portfolio , it is an integral part of the pp and will always be part of the pp. spending the cash to live on daily would unbalance the entire portfolio and require things to be rebalanced all the time .

so even if i used the pp i would maintain that 25% cash position and have the daily spending money outside the confines of what i would call my portfolio .

back in 2008 i think the insight income model held 25% cash . so yes that would get counted because it is an actual portfolio position and it will be eventually be put back in to action .

there is a difference when a small percentage of cash is cash for daily spending and cash is an actual portfolio position and must remain as cash in my models . .

so in short if the cash is part of a portfolio position and strategy it gets counted . if it is daily spending money to live on and is declining daily , i do not include it since the percentages in each fund that we hold are based only on that portfolio value not my total net worth .

[mathjak107]

i am a big believer in plan around what was , what is and what stands a reasonable chance of continuing then leave slack in the plan .

we can paralyze ourselves with our own visions of every negative thing that can happen and hurt ourselves for really no reason . the biggest obstacle to our own financial success is believing our own bull-shit that we envision in our heads.

my brain pounded me nightly about every negative that could happen when it came to buying in to the real estate partnership i did . i almost did not go through with committing almost 500k to the deal . I fought my brains visions and 15 years letter it was an incredible investment .

If it had turned out badly, you wouldn't think the same way about it.

In other words, just because something turns out well, that doesn't necessarily mean it was a good decision at the time.
Of course the reverse is also true: just because something doesn't turn out well, that doesn't mean it was a bad decision at the time.

if , if and if . if you want to keep doing the if's in your head don't walk out the door . what if you get run over . in fact don''t invest at all , what if you get sick and die by next year ? you will hurt yourself financially with the what if's ,


why not just spend all your money on insurances of all types since we have a whole load of what if's that can or could have happened .

there are risks and ramifications to everything in life . we weigh the pro's and cons and we make our choices .

but many times those visions of what if's will end up hurting you as you stare at the risks in things and end up quite poorer like those gold bugs who used to send me newsletters more than 30 years ago about how markets are collapsing along with the US dollar .

THEY BELIEVED THEIR OWN BULL-SHIT AND ARE A WHOLE LOT POORER FOR IT .

a flexible diversified portfolio does what it needs to as the big picture shifts . as an example while i can't disclose the model's holdings from the newsletter at one time we held lots of interest rate sensitive stuff on the bond side .

for quite a while now the bond side ranges from ultra short to bond funds that are go anywhere and can actually go in to areas of bonds that are helped by higher rates . if the economy slows down better choices will be utilized . been this way for more than 30 years with excellent results .

i don't use a static portfolio that is buy and die and just sits and sits . my main investing portfolio's have always been dynamic and shift a bit over time like nudging a big ship to keep it on course as the dynamics change . if you are wrong it never hurts you , you just don't make as much as if you were right in that instance . but all you need to be is right by more than you are wrong .

[Xan]

Mathjak, you aren't accounting for your survivorship bias. Sure, it's easy to be more right than wrong, just do what I did! Doesn't work that way. There are many who were aiming for what you did and were more wrong than right.

[mathjak107]

so what is your point , we should never invest because we fear being wrong ? or should we spend lots of money in in our investing hedging things that have little chance of happening and even those hedges may not be worth a darn when you expect them to .

investing is always going to be calculating risk vs the rewards and doing what your instincts tell you .

[Xan]

I'm saying that it's not wrong to invest in a way that does not rely on predicting the future.

[mathjak107]

well that is something balanced portfolio's have been doing since 1871 through wars , depressions , crashes , and an almost total financial collapse . so not sure of your point . a 50/50 mix or 60/40 works great in retirement or filling short term money needs .

in fact long term equities have been just fine over decades and need no mitigating for temporary short term dips . so no something like the pp is not needed if that is your point and would only have permanently hurt long term returns for a long term investor ..

the argument you are trying to make really is weak in practice . betting on the long shot is never good idea

[Xan]

Sorry, 1871 isn't far enough back for me to go all in on that strategy. For one thing, note that we so happened to win (or at least not lose?) all those wars. That kind of streak just doesn't go on forever.

[mathjak107]

once you start to fear everything and are a doom and gloomer you will never have your money working efficiently for you . counting on disaster or doom and gloom to see assets rise is an awful way to invest in my opinion . at this point i can lose 1/2 my assets and still be way a head of the pp had i gone that route . there is no guarantee with rising rates that the pp won't end up a dog as we go back towards historical averages . i think that is a far more likelier outcome than doomsday for stocks

[Cortopassi]

once you start to fear everything and are a doom and gloomer you will never have your money working efficiently for you . counting on disaster or doom and gloom to see assets rise is an awful way to invest in my opinion . at this point i can lose 1/2 my assets and still be way a head of the pp had i gone that route . there is no guarantee with rising rates that the pp won't end up a dog as we go back towards historical averages . i think that is a far more likelier outcome than doomsday for stocks

mathjak, I think we all understand your position, but just like your last stint on this forum, talking about how poor the PP is vs. the way you invest doesn't really fly too well on a site geared to the PP.

I think you understand that many of the people here came onto the PP because of very poor experiences trading their own money (me), trying to follow newsletters, getting screwed by an emotional response (me), etc. and the majority of us are more than happy to give up some gains to at least get the perception of less volatility in the PP (or similar) mix of assets.

I can quickly think of a dozen examples where I took an educated, calculated risk and got badly burned, being too early, too late, or too emotional with an investment. You obviously have better timing and emotional stability than most and have been rewarded.

[mathjak107]

i am not saying don't do the pp , but this bull shit about stocks facing doomsaday one day is really just a silly thing to say . nothing is forever . our treasuries may go bust , gold may be worthless and the dollar may crumble one day too . but yet all of you here invest in those items .

it is almost like many here try to justify giving up all that dough that they did as a pp investor by pointing out how stocks can meet their waterloo yet the same fate can happen to the very assets those here buy as some sort of insurance . that is my only objection , it is always equities that is in danger of crumbling away but nothing else seems to ever be spoken of as meeting the same fate .

i mean if we are playing what if , what if should apply to all the asset classes .

[stuper1]

To me the beauty of the PP is that it goes a couple steps beyond your typical 60/40ish stock/bond portfolio. One step is that it adds gold, which is uncorrelated to stocks/bonds and also if held physically acts as insurance against low-probability, serious events (my go-to being the solar flare that supposedly could knock out electricity for months on end, which would make trading stocks/bonds problematic, but wars could have a similar impact). The second step is that it uses only the safest bonds (U.S. Treasuries) rather than including corporate bonds, which turn out to be very correlated to stocks.

[Cortopassi]

i am not saying don't do the pp , but this bull shit about stocks facing doomsaday one day is really just a silly thing to say . nothing is forever . our treasuries may go bust , gold may be worthless and the dollar may crumble one day too . but yet all of you here invest in those items .

it is almost like many here try to justify giving up all that dough that they did as a pp investor by pointing out how stocks can meet their waterloo yet the same fate can happen to the very assets those here buy as some sort of insurance . that is my only objection , it is always equities that is in danger of crumbling away but nothing else seems to ever be spoken of as meeting the same fate .

i mean if we are playing what if , what if should apply to all the asset classes .

Agreed. It took too long but I have grown sick of doom and gloomers and conspiracy theory websites and people. There's only so long you can say Amazon is worthless and gold is going to the moon.

[mathjak107]

To me the beauty of the PP is that it goes a couple steps beyond your typical 60/40ish stock/bond portfolio. One step is that it adds gold, which is uncorrelated to stocks/bonds and also if held physically acts as insurance against low-probability, serious events (my go-to being the solar flare that supposedly could knock out electricity for months on end, which would make trading stocks/bonds problematic, but wars could have a similar impact). The second step is that it uses only the safest bonds (U.S. Treasuries) rather than including corporate bonds, which turn out to be very correlated to stocks.

the important thing to ask yourself is , if you are a long term investor , why do i care about mitigating short term temporary dips and hurting my long term balance permanently for what so far has been no reason ?

do i really need to pay for all of this insurance and did i really buy insurance or is the insurer just as likely of failure in these visions of doom that drive people to do this ?

and the biggest question i raised here 2 years ago that got me locked out of the other forums is what effect will rising rates have over the next few years on the pp. so far the last few years i called correctly as i said the pp was almost a one trick pony that counted on the 40 years of falling rates we had for the majority of it's gains
.

[stuper1]

Those are good questions. I think a lot of us who do the PP, or something similar, have already asked ourselves those questions and have come to a different conclusion than you.

[mathjak107]

which is fine if that is what you want .

there is no disputing that over the last 117 rolling typical accumulation periods and retirement periods that span as much as 30 years each , equities have always been the lead horse at the end of the day . hanging heavy weights on them with gold and long term treasuries in rising rates can really hurt things . the problem is these conservative portfolio's have a hard time really developing a cushion so when things weigh on them they hurt more .

it is like my income model which is 25% equities is really having a hard time getting traction . the growth and income model and growth model are having a good year already . the growth model is up over 6% after today . the conservative income model is struggling to stay positive .

yeah there is more volatilty in the more equity heavy portfolio's but you fall from balances eventually that even at the lows beat where you would be as a very conservative investor .

i don't know how many really think about this . all they know is they sidestepped some temporary dip but they fail to realize at the low that dip is still hundreds of thousands of dollars higher over the long haul

[Xan]

i am not saying don't do the pp , but this bull shit about stocks facing doomsaday one day is really just a silly thing to say . nothing is forever . our treasuries may go bust , gold may be worthless and the dollar may crumble one day too . but yet all of you here invest in those items .

it is almost like many here try to justify giving up all that dough that they did as a pp investor by pointing out how stocks can meet their waterloo yet the same fate can happen to the very assets those here buy as some sort of insurance . that is my only objection , it is always equities that is in danger of crumbling away but nothing else seems to ever be spoken of as meeting the same fate .

i mean if we are playing what if , what if should apply to all the asset classes .

We do. We only hold 25% in each of those asset classes. They all could face their Waterloo, that's why we hold ALL of them.

You hear a lot about the potential downside of stocks in particular because, well, we hear a lot about stocks from you. So that's the topic.

[mathjak107]

as i said in an earlier post , i always plan around what was , what is , and what stands a reasonable chance of continuing .


until i have reason to believe anything is severely different there is no reason not to and betting heavy on the unlikely exceptions is not something i would do . 50% equities is quite normal for retirement ,it certainly is not betting the ranch on one outcome . but the model has to make sense for the conditions we are in .

as i said the bond side is quite un-interest rate sensitive . if stocks are sluggish they will not be stalled out by the heavy drag of anything to interest rate sensitive .

i don't track it but i would think the pp is not gaining much traction the last few years and i bet the returns are not even close .

my insight growth and income model 60/40 was up:

2013-20.3
2014 9.3
2015 .80
2016 8.2
2017 16.5

what was the pp up those years ?

[mathjak107]

2008 was a non event for a long term investor unless it was the investors own bad behavior that hurt them . . in fact if you retired in 2008 , 10 years in you are no different than any other average retiree group in history . for a long term investor it was much ado about nuttin .

but here is 2007-2017

2007 up 6.1%
2008 down 33.
2009 up 28.1
2010 up 12.2
2011 flat
2012 up 13.40 .
2013 20.3
2014 9.3
2015 .80
2016 8.2
2017 16.5

so what did the pp do ? how much could that model loose and still not be at the pp balance ? a lot i would bet .

when you decide what is the right investment path for you that is what you have to consider. i know there is a lot of high fiving that goes on here every time the stock market takes a dip but you have to consider that even after that equity dip you may be still , soooooooo far lower in balance .

[flyingpylon]

2008 was a non event for a long term investor unless it was the investors own bad behavior that hurt them . .

But that’s kind of the point, at least for me.

My Dad retired in the very early ‘00s and got smacked by the tech bubble. Made decisions that turned out to be bad ones.

Got smacked again in 2008. Made decisions that turned out to be bad ones, again.

It gets worse from there, but suffice to say I’m not interested in having that happen to me. I am certainly more money and investing savvy to begin with, but it’s hard to know how you’ll react when your working years are over and your life savings take a massive hit like that.

When I was young I would throw caution to the wind but now with 10 or so years to go (hopefully) I am fairly well positioned and much more focused on simply not screwing it all up.

[mathjak107]

If he bailed from the pp because of losses it would still be another bad investor decision. All he had to own was an index fund and he would have been fine. You can't protect people from themselves. A better choice would have been to have someone handle his money which today can be done for a fraction of a point , invest it normally and he would have had a great balance.

Studies show that investors with no stomach for volatility will not likely stay with even a conservative model. They just have lower trigger points when losses happen

[mathjak107]

But most do not stay with it because while it may not fall as much in those rare downturns it is hard to stay with because most of the time it lags . It begins to be like waiting so long for the down turn ship to come in the pier rots away . It reaches a point you are just left to far behind waiting for it's day in the sun.

I tried it 2x and gave up on it.

[Cortopassi]

If he bailed from the pp because of losses it would still be another bad investor decision. All he had to own was an index fund and he would have been fine. You can't protect people from themselves. A better choice would have been to have someone handle his money which today can be done for a fraction of a point , invest it normally and he would have had a great balance.

Studies show that investors with no stomach for volatility will not likely stay with even a conservative model. They just have lower trigger points when losses happen

But that's the whole point. One is a lot less likely to bail from the PP during a meltdown of any of the components because the portfolio as a whole will be doing fine.

Pug's Dad's experience is my Dad's. And partly mine. And I can say from experience it is 99% easier to stomach downturns under to PP than if I was really heavy into stocks (or gold) instead. At least for the last 4+ years.