Full Circle’s Mutterings on Money
Post Reply
 
Thread Rating:
  • 0 Votes - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
01-02-2016, 09:47 AM
RE: Full Circle’s Mutterings on Money
(01-02-2016 09:02 AM)Full Circle Wrote:  
(01-02-2016 07:08 AM)Dom Wrote:  Ok then, for a young person defining the target amount and time available to reach it is not that important. Once you are around middle age, it becomes crucial to figure out how much money you need to have to retire when and how you want, so you can tailor investments accordingly.

Personally, I didn't get serious about it until I was 40, and I retired at 58, having achieved the $ amount needed to live my life the way I want to. Now I am in a very different phase of money management.

I agree with you, the earlier you start the easier it is. I worked my butt off trying to achieve my goals within 15 years - I literally worked some 12 or more hours a day 7 days a week for those 15 years to raise enough money to invest to get where I wanted to be in such a short time. Much easier to start early, but many of us end up starting late.

Congratulations Dom! Fifteen years is not much time to accumulate everything one needs to retire with some semblance of financial security.

One of the things I have noticed from conversations with people is that they attempt to force fit the returns to the time they have available, in other words if they think they need $250K to retire and only have ten years left to make that they then take on huge risks to achieve their goal, most end up losing much of what they started with.

(01-02-2016 07:08 AM)Dom Wrote:  One thing is for sure, nothing is more miserable than poverty in your old age. And unless you invest, you are pretty much guaranteed to end up poor.

No matter what your income, you have to put away a percentage for later.

You got that right.

I am one of four siblings. I am the only “ant” of the bunch, the others are all “grasshoppers”, money burns a hole in their pocket. Luckily they are great earners but you can’t keep that up forever so I worry for them in their old age. They have no minions working for them. Undecided

Thank you for clarifying my intent with this thread, it is mostly about the mechanics, and while I may digress here and there about personal money management habits, that’s not the focus.

Just 15% went into extremely high risk ventures. However, I limited this to a field I knew much about and was successful only because I could tell when to pull out just by the ads they produced, no waiting for reports.

I also allotted another 15% for real estate, mini flips as well as places I would live in, until I had enough money to buy the land I wanted and build the (small retirement) home the way I wanted.

The rest went into the usual diversification.

[Image: dobie.png]Science is the process we've designed to be responsible for generating our best guess as to what the fuck is going on. Girly Man
Find all posts by this user
Like Post Quote this message in a reply
[+] 1 user Likes Dom's post
01-02-2016, 10:08 AM
RE: Full Circle’s Mutterings on Money
I got people for that. Big Grin

Currently have 85% in ETFs, 12% in Government securities and 3% in bonds.

#sigh
Find all posts by this user
Like Post Quote this message in a reply
[+] 1 user Likes GirlyMan's post
01-02-2016, 10:14 AM
RE: Full Circle’s Mutterings on Money
(31-01-2016 08:53 AM)Full Circle Wrote:  Quick Rant.

I want to know where the fuck where the classes in high school and college on how to properly invest and handle money?
----
----
End rant. Carry on.

I had it in college - I think it was a requirement of my degree - the course was titled: Personal Finance.

It pretty much covered everything you have covered and more... mortgages, retirement plans, tax issues, investment plans, etc.,. We even did mock investment assignments using real life companies and stock exchange stats.

I thought it was fun. I've used the knowledge pretty consistently & have always faired pretty well.

Consider I can't think it isn't still a degree requirement at every university.

A new type of thinking is essential if mankind is to survive and move to higher levels. ~ Albert Einstein
Find all posts by this user
Like Post Quote this message in a reply
[+] 1 user Likes kim's post
01-02-2016, 11:10 AM (This post was last modified: 01-02-2016 11:53 AM by Full Circle.)
RE: Full Circle’s Mutterings on Money
ASSET SELECTION or

1 FROM COLUMN A AND 2 FROM COLUMN B

You would think there could only be a few ways stocks and bonds could be broken up and packaged together. The truth is that there are countless products the alchemists on Wall Street have conjured up, some very useful, others a ticking time bomb. (there are leveraged ETFs that are 3X as volatile as their underlying index both in “long” and “short” positions. I won’t explain that here, it is suffice to say that if you get it wrong you just multiplied your misery by three).

In my view there are 3 major Asset Classes: Stocks, Bonds & Commodities.

Primer.

1) Stocks, also known as Equities. When you buy a share of a company you buy a small piece of the good and bad of that company. If you were to look at a prospectus (general description) for the company it will tell you how many outstanding shares exist, or how many slices of pie it has been cut up into. Apple for example has 5.5 billion outstanding shares!

Owning a share or equity position in a company entitles you to collect a dividend. Continuing with the Apple example they currently pay $0.52 per share once a quarter or about 2.1% for the year. You, as an investor in the company, know you will be getting $2.08 a year on your investment for the year but the big payout comes when the company shares gain in value. This happens when the company does well (sells more iPhones, iTablets, PCs etc).

2) Bonds, also known as Fixed Income Instruments. When you buy a bond what you are effectively doing is loaning your money for the promise of being paid interest on it. You can loan to the government via Treasuries, or municipalities, States and corporations. The safer the loan is percieved to be the less interest it pays out. Conversely the riskier the loan the more it pays in interest. Usually short term bonds/loans pay less because they aren’t perceived as risky and longer term bonds/loans pay more for the opposite reason. Loans to the US government are perceived as the safest bets, loans to start up companies the riskiest. I use the descriptor “perceived” because prices are set by other investors just like you, millions of them. The price is the collected wisdom, if you will, of the masses.

3) Commodities. Commodities are physical things such as precious metals, food, oil, natural gas, gasoline, timber, water and the like. Included are gold, silver, zinc, copper, pork bellies, cattle, corn, wheat, sugar, coffee, crude oil, refined oil, coal, natural gas...and all of these are priced as “futures”, or what investors believe they will be worth in the future. What you are buying in many cases are contracts to purchase the commodity in the future.

Back to deciding what to add to your portfolio. It can get very confusing trying to dertermine which of these Asset Classes to invest in and how much or even if you should invest in them at all. And why would you just not buy the best performing one in the last year and plunk all your money there?

Yeah FC, I’m just going to put all my money in Facebook or Apple. Or Oil stocks, I mean how much further can they drop huh?
Like I said previously, I’m happy with singles and doubles, going for the home run is not what I’m comfortable with.

As I showed in an earlier post about Efficient Frontiers, owning both stocks and bonds can increase your returns while decreasing your risk (Standard Deviation). This happens because different Asset Classes don’t often precisely mimic each other’s price movements. In other words when say stock prices are rising bond prices are falling to some degree and vice versa. This comparison of different price movement between Asset Classes is known as CORRELATION.

Here is a visual of what NON-CORRELATED classes look like in the real world. Intermediate-term Treasuries compared to the stocks in the S&P 500 over a period of about a month.

[Image: 8-8-11-Stocks-vs-Bonds.jpg]

So why would anyone want some of their investment falling when others are rising? Seems that would negate any gains right?

Earlier I said they don’t precisely mimic each other and are only correlated to some degree. The reason you want somewhat non-correlated Assets in your portfolio is to smooth out returns.

The following graph shows what different combinations would have looked like since 2007 when compared to an all stocks portfolio (S&P 500). Notice the huge drop in 2008-9 during the financial crisis, at one point the S&P 500 had dropped in value nearly 60%! While a 20% stocks and 80% bonds portfolio had dropped in value less than 10%. Since the bottom in 2009 the S&P 500 has staged a remarkable comeback and is now 60% above where it started in 2007 while the 20/80 is just over 40%.

[Image: eQ7au.jpg]

The important part to take notice in is the route all these porfolios took to get to where they are today, they are all positive as compared to when they started in 2007 and had you been Gulliver and woken up today without experiencing the volatility of the financial crisis you wouldn’t be the wiser.
However I asked this question earlier in the thread, “How much pain in losses can you withstand before you sell it all and go hide under a rock?” Because the only way you could have made the 60% gains of the S&P 500 is NOT to have SOLD when it was down 60%.

To be continued.

“I am quite sure now that often, very often, in matters concerning religion and politics a man’s reasoning powers are not above the monkey’s.”~Mark Twain
“Ocean: A body of water occupying about two-thirds of a world made for man - who has no gills.”~ Ambrose Bierce
Find all posts by this user
Like Post Quote this message in a reply
[+] 1 user Likes Full Circle's post
01-02-2016, 11:21 AM
RE: Full Circle’s Mutterings on Money
(01-02-2016 10:08 AM)GirlyMan Wrote:  I got people for that. Big Grin

Currently have 85% in ETFs, 12% in Government securities and 3% in bonds.

In the Vanguard example from earlier that mix is grouped in the Aggressive Growth category.

One of the Asset Classes your portfolio owns is International Stocks, I’ll be discussing why those are necessary in any well-diversified portfolio.

“I am quite sure now that often, very often, in matters concerning religion and politics a man’s reasoning powers are not above the monkey’s.”~Mark Twain
“Ocean: A body of water occupying about two-thirds of a world made for man - who has no gills.”~ Ambrose Bierce
Find all posts by this user
Like Post Quote this message in a reply
01-02-2016, 11:23 AM
RE: Full Circle’s Mutterings on Money
(01-02-2016 09:47 AM)Dom Wrote:  Just 15% went into extremely high risk ventures. However, I limited this to a field I knew much about and was successful only because I could tell when to pull out just by the ads they produced, no waiting for reports.

I also allotted another 15% for real estate, mini flips as well as places I would live in, until I had enough money to buy the land I wanted and build the (small retirement) home the way I wanted.

The rest went into the usual diversification.

The Real Estate aspect is one I think to be extremely important to a well-diversified allocation of assets. I mentioned this in the OP and hope to eventually get to it later on, how to analyze income property.

“I am quite sure now that often, very often, in matters concerning religion and politics a man’s reasoning powers are not above the monkey’s.”~Mark Twain
“Ocean: A body of water occupying about two-thirds of a world made for man - who has no gills.”~ Ambrose Bierce
Find all posts by this user
Like Post Quote this message in a reply
01-02-2016, 11:29 AM
RE: Full Circle’s Mutterings on Money
Main advantage of my fixed percentage portfolio is that it is rebalanced daily. Which means to maintain the relative percentage of stocks they sell when high and buy when low. Well that, and my cost for this professional service is $0.29 per $1000 which is basically unheard of in the investment community.

#sigh
Find all posts by this user
Like Post Quote this message in a reply
01-02-2016, 11:36 AM
RE: Full Circle’s Mutterings on Money
(01-02-2016 09:15 AM)onlinebiker Wrote:  I'm not a fan of "financial strategies"....

Plan all you like - you're still at the whim of fate.

Anyone who figures that "diversifying their funds" --- and having it all in paper --- cash, stocks, bonds -- isn't remembering history correctly....

ALL markets are capable of crashing - and are likely to, at some point.

....

I find it downright amusing when "experts" tell you that investing in gold, silver and other such things is "risky".

Even if your house burns down -- if you've got some gold, it'll still be there. It might be melted, but it's still gold.

I'm not saying saving money is a bad idea -- it's not.... But don't count on intangible things, that are simply a concept when you get right down to it -- to sustain you should things really turn to shit.

Some investments that I find good ---

Guns, (when bought properly -- that is, don't pay retail prices) -- ammo (properly stored, ammo keeps a lifetime) -- structural steel, or any building materials (again, properly stored) -- land - especially land capable of providing either an income (by renting it out as farmland) - or farming it yourself. Tools. Mass produced items such as nuts, bolts, screws, nails, rivets, --- In the event of a mass meltdown -- mass produced items will become exceedingly scarce -- and excellent trading material.......

Laugh all you want.....

But, if things really get bad, let me know how your stock portfolio tastes.................

Read on my friend, I mention commodities as part of the Asset Classes.

Are you aware that you can invest in companies such as Smith & Wesson, Sturm, Ruger, Colt etc? That you can invest in companies that mine the ore that gets bought by the manufacturing companies that make the guns and bullets that sell it to the companies that sell it to you?

Unless you think that the world is going to descend into chaos within the immediate future investing in companies and their futures is prudent in my view.

I’m going to be discussing sectors within the markets, perhaps the Materials, Mining, Energy and Industrials are more to your liking.

As for your snark, that doesn’t add anything of value to the discussion. Drinking Beverage

“I am quite sure now that often, very often, in matters concerning religion and politics a man’s reasoning powers are not above the monkey’s.”~Mark Twain
“Ocean: A body of water occupying about two-thirds of a world made for man - who has no gills.”~ Ambrose Bierce
Find all posts by this user
Like Post Quote this message in a reply
01-02-2016, 11:40 AM (This post was last modified: 01-02-2016 11:50 AM by Full Circle.)
RE: Full Circle’s Mutterings on Money
(01-02-2016 11:29 AM)GirlyMan Wrote:  Main advantage of my fixed percentage portfolio is that it is rebalanced daily. Which means to maintain the relative percentage of stocks they sell when high and buy when low. Well that, and my cost for this professional service is $0.29 per $1000 which is basically unheard of in the investment community.

Girly, I have never heard of rebalancing daily. From everything I have read and from practical experience rebalancing quarterly or yearly is sufficient. I’ll get into rebalancing soon enough.

But you are right about the necessity to rebalance, it does force you to sell high and buy low, most investors can’t get themselves to that. Many ride their winners and dump their losers only to see prices revert to their means.

ps I think this old quote of yours applies to investing as well as religion:

"There is a vast immeasurable and impassable sea of ignorance between an uninformed opinion based solely on a wish and a prayer and an educated best-guess based on rational theories with plausible mechanisms of action informed by the evidence as presented by our current ability and technology to measure. The former is for children, the latter for adults. Chronological age not withstanding.” ~ GirlyMan

“I am quite sure now that often, very often, in matters concerning religion and politics a man’s reasoning powers are not above the monkey’s.”~Mark Twain
“Ocean: A body of water occupying about two-thirds of a world made for man - who has no gills.”~ Ambrose Bierce
Find all posts by this user
Like Post Quote this message in a reply
01-02-2016, 11:50 AM
RE: Full Circle’s Mutterings on Money
(01-02-2016 11:40 AM)Full Circle Wrote:  
(01-02-2016 11:29 AM)GirlyMan Wrote:  Main advantage of my fixed percentage portfolio is that it is rebalanced daily. Which means to maintain the relative percentage of stocks they sell when high and buy when low. Well that, and my cost for this professional service is $0.29 per $1000 which is basically unheard of in the investment community.

Girly, I have never heard of rebalancing daily. From everything I have read and from practical experience rebalancing quarterly or yearly is sufficient. I’ll get into rebalancing soon enough.

But you are right about the necessity to rebalance, it does force you to sell high and buy low, most investors can’t get themselves to that. Many ride their winners and dump their losers only to see prices revert to their means.

To be clear, I'm not doing the daily rebalancing. It's set it and forget it for me. It is done programmatically at COB each day based on the fund managers' asset allocation percentages for that day. You are correct mine is an aggressive portfolio based on an expected retirement date of 2050 and they continually rewicker the asset allocation the closer we get to 2050 where it automatically reverts to a low-risk income fund with the bulk in Government securities. Odds of me making it to 2050 depends on the date of the Singularity but some progeny will still be alive. Big Grin

#sigh
Find all posts by this user
Like Post Quote this message in a reply
Post Reply
Forum Jump: