Finance, Boats, Retirement how do you decide?

[newt]

Money flies away when you're doing the drugs Prince did.

OK, that post wins this thread.

 

[backinblue]

Tiltrider,
Good point, and true, we don't have to do what others do. I guess I'm not a market guy, but I could understand playing it if one could afford to loose. And, overall, over time the returns aren't bad.
Best of luck.

Returns are better than "not bad" if you are invested diversely for the long term. About 14% avg annually for the last 10 years is pretty amazing actually and something like 11% over 65 years. Do the compounding math over that time period and it's unbelievable. Anyone who is invested in the market in the last few years should have seen their investments double. More than tripled in the last 10 years and that's w/o even adding any new money. True if you get scared and sell when there's a drop you will lose. Buy and hold has done well for me over my career.

Here's a neat trick....

If a new grandson is born, gift him $1000 and invest it for him in the stock market. Without any further investment after year 1, he will be a millionaire at 65 if the market continues to perform as it has in the past.

 

[bowball]

Returns are better than "not bad" if you are invested diversely for the long term. About 14% avg annually for the last 10 years is pretty amazing actually and something like 11% over 65 years. Do the compounding math over that time period and it's unbelievable. Anyone who is invested in the market in the last few years should have seen their investments double. More than tripled in the last 10 years and that's w/o even adding any new money. True if you get scared and sell when there's a drop you will lose. Buy and hold has done well for me over my career.

Here's a neat trick....

If a new grandson is born, gift him $1000 and invest it for him in the stock market. Without any further investment after year 1, he will be a millionaire at 65 if the market continues to perform as it has in the past.

Might as well put it in a Roth for the grandchild to avoid taxes. Or 529 for college. And don’t forget - these are nominal not real returns so a “million” won’t be like a million today.

 

[backinblue]

Might as well put it in a Roth for the grandchild to avoid taxes. Or 529 for college. And don’t forget - these are nominal not real returns so a “million” won’t be like a million today.

Correct, not adjusted for inflation, just making a point about long term investing in the stock market and the power of compounding. A million won't be worth what a miilion is today, but it will still be better than not having a million at all!

 

[tiltrider1]

Let’s see, when I was born Ferrari’s sold for $3,500. Now they sell for $500,000. Better make that a $100,000 investment.

 

[FWT]

Here's a neat trick....

If a new grandson is born, gift him $1000 and invest it for him in the stock market. Without any further investment after year 1, he will be a millionaire at 65 if the market continues to perform as it has in the past.

Better yet, TEACH them to buy 1 single share of SPY (S&P ETF) every year on their birthday beginning when they graduate. Maybe 2

 

[MYTraveler]

If a new grandson is born, gift him $1000 and invest it for him in the stock market. Without any further investment after year 1, he will be a millionaire at 65 if the market continues to perform as it has in the past.

Except that 1) it will be hard to maintain an 11% return without trading and triggering gain recognition (taxes) along the way, and 2) in 65 years, $1M will probably be below the poverty level.

 

[BruceK]

The old saying is "It`s time in the market, not timing the market, which works. True-ish, but if you buy dud( bad) shares, nothing works.

 

[FWT]

The old saying is "It`s time in the market, not timing the market, which works. True-ish, but if you buy dud( bad) shares, nothing works.

Which is why so many have simply gone to index funds.

I saw a stat in the last few days that said something like 80% of mutual funds failed to beat the index they benchmarked against in 2021. More surprising is that a serious minority of hedge funds did too, and those guys are supposedly the best and brightest earning fat fees for their work.

2021 was an "interesting" investments year. We came into the year with valuations stretched, and things only got more stretched as the S&P ended up 28%. Small caps went dead sideways since Feb. Midcaps largely the same. Below the surface of that was extreme sector rotation, where some sector would roar for just a few weeks then tumble as cash sloshed to a different sector with indexes little changed on the moves. A very large part of the index success came from just 5-10 of the largest stocks, mostly tech, while not so much in many others. As you say, WHAT you owned had a major impact. Yes there were some winners who just put in persistent moves but they were the exception.

So we enter 2022 with valuations yet higher, and bond yields spiking up on expected Fed rate hikes during the year ahead. Causing tech / nasdaq to tumble while the S&P less changed as cash sloshes out of tech and into defensives / industrials. In such a "thin" market driven by a handful of stocks, either performance needs to broaden or the big winners need to come to earth a bit to regain some overall market health. Or some of both. The real $64 question for 2022 is rates and their impacts. There has been NO WHERE ELSE to go but stocks for return when bonds yielded nothing and promised only cap losses on higher yields in the future. But as yields have risen and are poised to rise more, will cash get dragged out of stocks and into bonds at some point? So essentially in the continuing rotation, rather than from one stock to another stock, cash would slosh out of stocks and into bonds. Unknowable / unforcast-able, but worth keeping an eye on.

 

[backinblue]

I've never had good luck picking stocks. I've never had bad luck investing in mutual funds and stock indexes. It's easy to pick apart anyone's particular investment if you want to. I'm happy that the value of my retirement fund tripled in the last few years with relatively consevative investments, including paying cash for my current boat.

 

[smitty477]

I've never had good luck picking stocks. I've never had bad luck investing in mutual funds and stock indexes. It's easy to pick apart anyone's particular investment if you want to. I'm happy that the value of my retirement fund tripled in the last few years with relatively consevative investments, including paying cash for my current boat.

"my retirement fund tripled in the last few years with relatively consevative investments"
I am curious which conservative fund(s) have tripled in the last few years?

 

[backinblue]

"my retirement fund tripled in the last few years with relatively consevative investments"
I am curious which conservative fund(s) have tripled in the last few years?

In simply an S&P 500 index you should have doubled your money in just the last 3 years. Go back a few more years and do the compounding math and you'll see it's not that difficult. I invest mostly in mutual fund managed by Janus Henderson. Some have returned very good rates over long periods of time. I guess some of the funds I really shouldn't call "conservative" but it's still somewhat diversified vs. me trying to pick an individual stock.

 

[FWT]

I've never had good luck picking stocks. I've never had bad luck investing in mutual funds and stock indexes. It's easy to pick apart anyone's particular investment if you want to. I'm happy that the value of my retirement fund tripled in the last few years with relatively consevative investments, including paying cash for my current boat.

To be crystal clear *I* am not picking apart anyone's investments

 

[smitty477]

In simply an S&P 500 index you should have doubled your money in just the last 3 years. Go back a few more years and do the compounding math and you'll see it's not that difficult. I invest mostly in mutual fund managed by Janus Henderson. Some have returned very good rates over long periods of time. I guess some of the funds I really shouldn't call "conservative" but it's still somewhat diversified vs. me trying to pick an individual stock.

“In simply an S&P 500 index you should have doubled your money in just the last 3 years.”
Without fees or tax's, I believe it would be about 5 to double (not triple).

“I guess some of the funds I really shouldn't call "conservative"”
I have not read any articles that consider 100% stock funds as “conservative”

Perhaps look up the relative S & P 500 levels for a couple of other time frames and see what they say – maybe the year 2000 and 2007 will have some interesting data.

 

[backinblue]

“In simply an S&P 500 index you should have doubled your money in just the last 3 years.”
Without fees or tax's, I believe it would be about 5 to double (not triple).

“I guess some of the funds I really shouldn't call "conservative"”
I have not read any articles that consider 100% stock funds as “conservative”

Perhaps look up the relative S & P 500 levels for a couple of other time frames and see what they say – maybe the year 2000 and 2007 will have some interesting data.

Data I see for S&P annual returns are (roughly):

2019 29%
2020 16%
2021 27%

Do the math and don't forget to compound and that should return roughly 90% over that time period. I don't want argue over the fine points or minor details, I was just trying to make a point. People say the stock market is a casino and people lose everything and that may be true in some cases, but historically it's one of the best places to invest your money long term. In fact, if you are investing regularly over a long period of time, the down years are actually helpful. (dollar cost averaging approach) Someone once said "You make most of your money in a down market, you just don't know it at the time"

 

[smitty477]

Data I see for S&P annual returns are (roughly):

2019 29%
2020 16%
2021 27%

Do the math and don't forget to compound and that should return roughly 90% over that time period. I don't want argue over the fine points or minor details, I was just trying to make a point. People say the stock market is a casino and people lose everything and that may be true in some cases, but historically it's one of the best places to invest your money long term. In fact, if you are investing regularly over a long period of time, the down years are actually helpful. (dollar cost averaging approach) Someone once said "You make most of your money in a down market, you just don't know it at the time"

Yes - I believe this was the point.
"I'm happy that the value of my retirement fund tripled in the last few years with relatively conservative investments"

 

[backinblue]

Yes - I believe this was the point.
"I'm happy that the value of my retirement fund tripled in the last few years with relatively conservative investments"

By few I did not mean 3, I meant a handful, maybe 5 or so. Maybe we need to revert back to the nautical terms thread and discuss few, several, handful, bunch, many, etc. Sorry, not trying to be difficult but I was speaking in generalities, maybe you want hard figures with many decimal places like some do. But if you buy the fact that money in the market could have roughly doubled in the last 3 years, it's not hard to imagine that you don't need to go back too many years to see a tripling effect. That has been my experience but it of course depends on what returns you are earning. YMMV.

 

[ksanders]

Kinda back on the subject of Retirement and boat financing...

All these great returns are wonderful!

Right up to the point that the market corrects and you need your money while the market is in it's downturn years.

That is the problem retired folks have. We frankly do not have the time left in productive life to weather another market cycle so we need to be conservative.

Yes, we want all the gains we can get! But that desire is tempered by our need to not fail and run out of money

My old manager was ready to retire in 2000. But... He was greedy for the gains of aggressive investing.

He rode the market all the way to the bottom, and was still working the last time I checked several years ago.

My current manager is my age 59. He is planning on retiring at 62 but... He is invested very aggressively.

When will the market correct? Will he time it correctly? Will he loose his retirement dreams?

I on the other hand am different. I am conservatively invested at this point. I am retiring at 60, in four short months and cannot fail. This is my life, and failure is just not an option, not at this point.

Before splitting with my wife last spring I had a paid off lakefront home, a paid off boat, and zero other debt. Not a dime. My lawyer did not believe me.

We will both live extremely comfortably off of our assets no matter what the market does. We have a business that provides a great income for both of us, but we planned it so that a good retirement would not need the business, but with it, we both have a Great retirement.

Again... no chance for failure at this point.

I would caution anybody reading this to take chances when you are younger. Realize the gains from aggressive investing over time. Do not get too greedy. When you have enough, look at your life calendar, and make sure you do not fail like Stan my manager. He was planning on retiring at 60 and I know for a fact that he was working at 70

 

[backinblue]

"I would caution anybody reading this to take chances when you are younger. Realize the gains from aggressive investing over time. Do not get too greedy. When you have enough, look at your life calendar, and make sure you do not fail like Stan my manager."

You are absolutely right and the market will absolutely correct sooner or later. You are also correct that it is dangerous to be 100% in stocks in retirement if you need that money for living expenses. Withdrawals in a down market are devastating and cannot likely be made up. So that's where your retirement investment strategy should differ from when you were much younger. However, the old ways of thinking are changing because you could be in retirement for 20, 30, 40 years. That is considered a long term investment. So more modern investment advice is to still invest while in retirement, but keep some money in a very safe investment to weather the downturns. You withdraw money from there when the market is down, and withdraw from your stock funds during good times as you money contiues to grow.

 

[smitty477]

By few I did not mean 3, I meant a handful, maybe 5 or so. Maybe we need to revert back to the nautical terms thread and discuss few, several, handful, bunch, many, etc. Sorry, not trying to be difficult but I was speaking in generalities, maybe you want hard figures with many decimal places like some do. But if you buy the fact that money in the market could have roughly doubled in the last 3 years, it's not hard to imagine that you don't need to go back too many years to see a tripling effect. That has been my experience but it of course depends on what returns you are earning. YMMV.

"it's not hard to imagine that you don't need to go back too many years to see a tripling effect."

What is the return of the S&P 500 (with no fees) from August 2007 to now and adjusted for inflation?
What is the return of the S&P 500 (with no fees) from June 2000 to now adjusted for inflation?
Do we need to work on defining the meaning of doubling or tripling?

 

[bowball]

"it's not hard to imagine that you don't need to go back too many years to see a tripling effect."

What is the return of the S&P 500 (with no fees) from August 2007 to now and adjusted for inflation?

Nominal return 3.18x

What is the return of the S&P 500 (with no fees) from June 2000 to now adjusted for inflation?

Nominal return 3.23x


Do we need to work on defining the meaning of doubling or tripling?

Given you deliberately picked dates where there would be the largest subsequent decline, even these show what would be the worst case returns for an investor over that time period. (For example, Reentering the market June 2009 would have a 5.11x nominal return. )

However, this was an investment time period unlikely to be replicated for a long time, or at least I wouldn’t count on it.

Fees on s&p index funds are something like 5bp - in other words, functionally free. Though tracking error is the real drag.

As for inflation, care to define that? I find it troubling that people use CPI etc as relevant to them. The basket of hood varies for each person.

And to be pragmatic, whatever inflation we have is constant no matter what we invest in so the absolute return is what matters, deciding between investments. With (increasing) inflation you want to be in stocks versus straight bonds.

 

[ManoBoat]

Thank you for posting this detail. Nothing like real world experience to help with making your own estimates.

Just as one individual data point around the subject of this thread:
I never looked at this while I owned the boat, but in some year-end exercises today I ran across the deposit from the Klee Wyck transaction and thought it might be interesting to do the math. The subject comes up here from time to time.

For general landmarks, I owned the boat for ten years and paid around a quarter million when I bought it.

I looked at capital cost which I considered to be purchase cost minus proceeds of sale+ large maintenance and improvement spending+ the time value of money at 4%.
That cost over the ten years was $371k or an average of 37k/year

Non- fuel operating costs consisted of moorage, insurance, license, tax, and registrations. That total was around 160k or 16k/year.

Fuel and fluids/routine maintenance (bottoms, fluid changes, batts, etc) total around 84K so about 8.5k per year.

These are rough numbers, but the all-in cost of owning KLEE WYCK for ten years then was around 600k total, 60K per year, or 5K per month.

I will grant you that we were not careful, and we moored in a high rent district, but I always cringe when I see this 10% of purchase price as annual ownership cost over the life of your ownership. I think more like 20% could be more realistic.
For a frame of reference, the difference between purchase price and sales price was only 13% of total ownership cost and fuel was only 3.4% of total cost.

It was worth it....

 

[ksanders]

"I would caution anybody reading this to take chances when you are younger. Realize the gains from aggressive investing over time. Do not get too greedy. When you have enough, look at your life calendar, and make sure you do not fail like Stan my manager."

You are absolutely right and the market will absolutely correct sooner or later. You are also correct that it is dangerous to be 100% in stocks in retirement if you need that money for living expenses. Withdrawals in a down market are devastating and cannot likely be made up. So that's where your retirement investment strategy should differ from when you were much younger. However, the old ways of thinking are changing because you could be in retirement for 20, 30, 40 years. That is considered a long term investment. So more modern investment advice is to still invest while in retirement, but keep some money in a very safe investment to weather the downturns. You withdraw money from there when the market is down, and withdraw from your stock funds during good times as you money contiues to grow.

Yes I agree. But regarding lifespan and even more important active lifespan do not over estimate your life calendar.

I use the Social security Actuary Tables as a guide. A 59 year old male will on average live 22 more years.

But... you go through stages in the aging process. Your big activity times for most people will be up into their early to mid 70's. That is when you need to have money available to meet your retirement dreams.

At some point all of our bodies change and we are for lack of a better term, staying comfortable buy not doing so much.

 

[smitty477]

Given you deliberately picked dates where there would be the largest subsequent decline, even these show what would be the worst case returns for an investor over that time period. (For example, Reentering the market June 2009 would have a 5.11x nominal return. )

However, this was an investment time period unlikely to be replicated for a long time, or at least I wouldn’t count on it.

Fees on s&p index funds are something like 5bp - in other words, functionally free. Though tracking error is the real drag.

As for inflation, care to define that? I find it troubling that people use CPI etc as relevant to them. The basket of hood varies for each person.

And to be pragmatic, whatever inflation we have is constant no matter what we invest in so the absolute return is what matters, deciding between investments. With (increasing) inflation you want to be in stocks versus straight bonds.

I generally use this for inflation...
https://www.usinflationcalculator.com/

You picked the S&P 500 earlier, the same as you picked tripling in a few years. Later you said it not too hard to imagine going back too many years to see a tripling to today.
The answer(s) to that question are what you found above - about 21, 14 and 8 years or so.

 

[bowball]

I generally use this for inflation...
https://www.usinflationcalculator.com/

You picked the S&P 500 earlier, the same as you picked tripling in a few years. Later you said it not too hard to imagine going back too many years to see a tripling to today.
The answer(s) to that question are what you found above - about 21, 14 and 8 years or so.

“You” actually wasn’t me; I just volunteered to answer your question, since I saw you cherry picked your entry points which intrigued me.

As for inflation the reason I always paused here is people take it for given. The various indices just measure a basket of goods, and sometimes try to adjust for technology improvements but often don’t . Do you rent or own? How much health care do you consume? Etc etc. so it’s a very rough guide that may not reflect your personal reality. Plus the availability heuristic makes us psychologically overweight those good s like gas prices we interact with the most. My point was that whatever your personal inflation is it doesn’t change depending on your investment portfolio so absolute return is what pays the bills.

However, being in the S&P was a nice place to be over the years. FAANG (plus M) even better.

The academic in me! I just like these types of conversations. Don’t get me started on Bitcoin! Sorry!

 

[backinblue]

You can play with definitions and different periods of time, inflation, etc, all you want. For me it's really quite simple. If 5-6 years ago, my total portfolio value was $1M and today it is $3M, then for me it has tripled. You can always find was to manuipulate numbers and data to support almost any argument. There are plenty of what-ifs you could apply to prove me wrong. However, you won't convince me that my portfolio has not tripled because I can look at the numbers that confirm it. Also, the S&P is a good guide, but I never said I was significantly invested there. One of my funds has averaged 25%/yr for the last 5 years and 20%/year over the past 10 years!! I'm sure that helped.

 

[BandB]

It's easy to look back at the best funds or the best years. Even 10 years is dangerous right now. But let's look at 10 years a moment. The S&P has averaged 11% return over the last 10 years. However, go 15 years and that average is more in the order of 7%.

Mutual funds have averaged 7% over the 10 years and 6% over the 15 years. US Large Cap funds have averaged 12% and 9%. Long term bonds have averaged 7% and 5%. Now the worst of the group are International Large Cap at 5% and 4% and Short term bond funds at 2% and 3%.

I read all the talk about 5 years but that's not a reasonable investment horizon to depend on.

My personal philosophy is to depend on 7% from stocks, 6% from mutual funds, 4% (equivalent of 6% taxable) for municipal bonds, 2% for treasury. Be conservative, and if it does better, pull some of that out why at the peak and be thankful for it.

Higher returns are possible but always with risks. By far our greatest return has been investing in our business, but that was very risky and we've always been prepared to lose it all. Real Estate can be the best or worst. We average about 6% on rental homes.

Investments I don't touch, ever.
1-Corporate bonds. I'm not going to finance someone's business. Neither a borrower or a lender be. That's what Polonius said.
2-Mutual bond funds, municipal or corporate. Not going to complicate an investment, especially tax free one, by putting it in a fund.

I just caution people not to be misled by a few investments or a few years. It's like scamming someone. The best scams start by giving you something for nothing. A 20% return is like that. Tripling or 90% in three years is like that. They're all mirages, trying to pull you in. When it happens, become delirious but don't let it deceive you. I bought one dangerous stock and it worked great but doesn't encourage me to do more. I bought Shopify because I knew what we were paying them. 2/10/17 at $55. Sold half of it on 6/11/20 for $743. Still own the other half at $1,168. I was just glad to get my money out and a profit on selling half. Now willing to just relax.

I also look at dividend yields on stocks. For instance, Verizon was $46 in 2012 and is only $54 now. However, it's dividend yield is 4.9% but that's 5.5% of my investment. VF was $38 in 2012 but now only $72, However, not quite as bad as that looks since current annual dividend is $2. That's only 2.8% of current price but it's 5.2% of the investment.

And can't discuss without using the number one catch-word, but it's important. Diversification.

 

[OldDan1943]

Dont turn over your money with anyone named Bernie madoff.
I know of one man who had to sell his multi-million dollar condo, his 2 cars and move in with his married daughter.

The interesting part is, he never complained while he was getting those fantastic returns but, he sure did complain when they dried up over night.

I handle my own investments. Sitting on my hands and doing nothing, since 97 the gross increase has been 5 times.

 

[tiltrider1]

I view the investing world quite different than most of your Financial Advisers. Personally, I find most Financial Advisers are short sighted and are only knowledgeable on 1/4 of what I consider financial investments.

If you tell me you are diversified because you have your money spread among Big Cap funds, Small Cap funds, International funds, and bond funds I applaud you but I don't consider that balanced.

Cash Flow has been brought up here several times and I find this to be very important. I also believe your cash flow sources need to be balanced. I plan my retirement by making sure that my cash flow sources will cover my expenses and that I have mulitiple cash flow sources. My sources are a combination of Social Security, Apartment Rental Income, dividends and royalties. Like BandB I steer well clear of Bonds.

My Investments cover Multifamily Real estate, S&P 500 Index mutual funds, RIETs and Stocks. I do not consider raw land, my home, boat or cars as investments. I average 25% in Multifamily, 25% in Index funds, 20% in stocks, 20% RIETs and 10% in cash. The Stocks and RIET's are self managed. My self managed stocks have averaged 25% for the last 10 years but, that is taking a starting point after the 2009 collapse. REIT's are interesting in that on average my REIT's pay a 3% dividend, yet in the last year alone I am averaging return of 30%. Again, I watched the collapse of REIT's due to Covid 19 and then saw an opportunity to jump in.

So what am I saying? I'm saying I have no fear of a market collapse, my life is founded around a diverse set of cash flow. This gives me the power to enjoy my life even when the market is going down. Now I won't be buying any air planes or vacation homes during a market collapse but I won't have any issues paying my day to day bills.

 

[backinblue]

To BandB: I'm not trying to pull anyone in or sell anyone on anything. I am relating my personal experience. I was smart enough or lucky enough to invest in the market steadily over 40+ years. I'm not basing my experience on the last 3 years at all. I'm also not trying to brag. If you say 7% is a good expected return over the long term, I'll take that every day. But for someone who has worked very hard their entire life, starting at less than $200/week at my first real full-time career job, and to now have several million in retirement funds is more than I could have ever imagined. I know to you and many here, that is nothing, but for an average worker to get to that point through disciplined investing over a long time, is an accomplishment to me. Nuff said.