Gyroscopic Investing

Kbg wrote: ↑Wed Apr 06, 2022 1:41 pm Fed policy has a significant impact on the economy and business which is why so much attention is given to what they do.

The Fed can have a huge impact on the stock market but it's not like someone at the Fed is waving a wand or rubbing a lamp and saying "Stock Market go down" and poof it happens. Weirdness is what happened between 2008 and 2020. Free market forces were seriously stifled by the Fed with their bond buying actions. The now well known "Fed Put."

What's going on now is a good old fashioned re-accounting and readjustment of asset prices resulting from inflation and rising interest rates...as interest rates go up money reallocates to bonds (to a degree) and the cost of capital gets more expensive. Both make stocks comparatively less attractive vs. other assets.

And for us who are older...kid, this ain't nothin. When indexes are down 40%+ and individual stocks way beyond that and you are in year 3 of a bear market with back to back 20% losses your definition of dramatic will be different.

Hate to be Bogelesque...but if you are younger, stay they course, stay invested and keep your monthly buys going. This will be without fail a benefit to you. I always tell my kids this with their investments; If you walk into Walmart and everything in the store is -20% from three month's ago are you buying or walking out the door? If you don't have to worry about drawdown sequence, there is one correct answer: Buy.

Don wrote: ↑Thu Apr 07, 2022 7:52 am

Kbg wrote: ↑Wed Apr 06, 2022 1:41 pm Fed policy has a significant impact on the economy and business which is why so much attention is given to what they do.

The Fed can have a huge impact on the stock market but it's not like someone at the Fed is waving a wand or rubbing a lamp and saying "Stock Market go down" and poof it happens. Weirdness is what happened between 2008 and 2020. Free market forces were seriously stifled by the Fed with their bond buying actions. The now well known "Fed Put."

What's going on now is a good old fashioned re-accounting and readjustment of asset prices resulting from inflation and rising interest rates...as interest rates go up money reallocates to bonds (to a degree) and the cost of capital gets more expensive. Both make stocks comparatively less attractive vs. other assets.

And for us who are older...kid, this ain't nothin. When indexes are down 40%+ and individual stocks way beyond that and you are in year 3 of a bear market with back to back 20% losses your definition of dramatic will be different.

Hate to be Bogelesque...but if you are younger, stay they course, stay invested and keep your monthly buys going. This will be without fail a benefit to you. I always tell my kids this with their investments; If you walk into Walmart and everything in the store is -20% from three month's ago are you buying or walking out the door? If you don't have to worry about drawdown sequence, there is one correct answer: Buy.

And what if you're older?

Mr. Contrary wrote: ↑Thu Apr 07, 2022 9:06 am

Don wrote: ↑Thu Apr 07, 2022 7:52 am

Kbg wrote: ↑Wed Apr 06, 2022 1:41 pm Fed policy has a significant impact on the economy and business which is why so much attention is given to what they do.

The Fed can have a huge impact on the stock market but it's not like someone at the Fed is waving a wand or rubbing a lamp and saying "Stock Market go down" and poof it happens. Weirdness is what happened between 2008 and 2020. Free market forces were seriously stifled by the Fed with their bond buying actions. The now well known "Fed Put."

What's going on now is a good old fashioned re-accounting and readjustment of asset prices resulting from inflation and rising interest rates...as interest rates go up money reallocates to bonds (to a degree) and the cost of capital gets more expensive. Both make stocks comparatively less attractive vs. other assets.

And for us who are older...kid, this ain't nothin. When indexes are down 40%+ and individual stocks way beyond that and you are in year 3 of a bear market with back to back 20% losses your definition of dramatic will be different.

Hate to be Bogelesque...but if you are younger, stay they course, stay invested and keep your monthly buys going. This will be without fail a benefit to you. I always tell my kids this with their investments; If you walk into Walmart and everything in the store is -20% from three month's ago are you buying or walking out the door? If you don't have to worry about drawdown sequence, there is one correct answer: Buy.

And what if you're older?

I think "stay the course" still applies, but you shouldn't be that exposed to stocks anyway if you are older. In a permanent portfolio, you probably wouldn't be down more than a few percent, if at all.

Don wrote: ↑Thu Apr 07, 2022 7:52 am And what if you're older?

Kbg wrote: ↑Thu Apr 07, 2022 5:14 pm

Don wrote: ↑Thu Apr 07, 2022 7:52 am And what if you're older?

If you are on this board then a couple premises of the PP are that people are horrible at predicting and we do not know the future. I accept both in my investing approach. If you accept the above and are retired or nearing retirement then hopefully you are aware of safe withdrawal rates. SWR are ultimately a big (and pretty darn complex backtest) with no guarantee of history repeating itself. However, there's some pretty crazy economic periods covered which means there are some pretty good stress cases in the data. Not a total future proof approach, but definitely better than making something up. Accordingly, you should have a portfolio allocation by now and a matching SWR...and to be very clear you can't tinker with the former without adjusting the latter. They are inextricably linked. (and we all hope SHTF doesn't happen in our lifetimes). That's the best we can do.

There's quite a bit of evidence that your allocation doesn't really matter all that much once you are retired within a fairly broad range of possibilities.

If you want to get into the above, deep...head over to earlyretirementnow.com. It's not easy reading but I am unaware of any other place that deals with SWR as comprehensively, transparently and completely data (vs. opinion) based.

IIRC he's even done some analysis using the PP allocation...spoiler alert, it's not a particularly good option compared to other allocations.

dockinGA wrote: ↑Thu Apr 07, 2022 7:22 pmI think I found the article you're talking about. It's a good writeup, but unfortunately he's including the period when gold was illegal to hold and didn't fluctuate much if at all against the dollar.

Tyler wrote:Here you can very clearly see the problem with mixing gold datasets before and after 1971. They may both be called “gold” but they track completely different assets following very different rules.