[2020] A little stock market sense

[RENTER]

In a (hypothetical) 60/40 investment portfolio the 40% in fixed income (bonds and CD's) offsets the riskier 60% in the stock market to avoid the "rollercoaster"

View attachment 105626
https://corporate.vanguard.com/cont...global-60-40-portfolio-steady-as-it-goes.html

View attachment 105627

Except when interest rates rise and they both go down together. Sorry I will stick with my plan with the USA 36 trillion in debt.

 

[Brett]

Obviously smarter than you if you do not understand owning everything with equal amounts is not thinking your smarter than everyone else. It is knowing you're not smarter than others so protecting your ass while growing at the same time.

Also, smarter than you if you do not understand matching or beating the market over a bull and bear cycle means. Common sense says that if you trail the market in a bull and beat it in a bear you will match it or beat it in the long run. Knowing that if you drop 50% you need 100% to get back to even makes it work.

What I am is more curious than you. I was curious what happens if you divide the pie into slices and rotate it so you are selling the hot slices and buying the cold slices. Guess what? It works. Then what I was curious if you expand the pie to include treasuries, bears, commodities and foreign. Guess what? It still works over a bull and bear cycle.

It works a lot better than a 60/40 which did not provide the protection many thought they were going to have and it matches an index without the rollercoaster ride.

So, if you cannot understand this simple concept that a 8th grader should understand, I guess I am smarter than you.

Except when interest rates rise and they both go down together. Sorry I will stick with my plan with the USA 36 trillion in debt.

Keep rotating your pizza !
(but don't get burned

https://www.nytimes.com/2022/12/02/business/stock-market-index-funds.html

 

[RENTER]

Keep rotating your pizza !
(but don't get burned

View attachment 105628
https://www.nytimes.com/2022/12/02/business/stock-market-index-funds.html

Oh by the way, when interest rates rise and those 60/40 and target funds that people thought were safe get crushed, it is time to rotate my pizza as my rising rate interest rate funds and stock bear funds get to hot.

Then I will take the profits and the higher interest rates to buy the normal rate funds and stocks funds that fell and wait for interest rates to fall and have capital gains.

 

[RENTER]

Yawn - you’re picking up nickles in front of a steamroller. It works for awhile - until it doesn’t and you’re giving away a big chunk of returns in the form of trading fees.

Either own the index or be prepared to do some deep fundamental analysis and then buy and hold. I bought into PLTR a couple of years ago when it got ridiculously cheap and it looked like the world was getting more dangerous (the technology and military applications are pretty amazing).

My cost basis is $7.63/share. I’ve now sold a bunch in the last week so my position is now down to a measly 350 shares (was 1500 when I bought in). With your method I would have likely missed returns of over 1000%. Problem is I now need to figure out where to put the cash.

Oh by the way, please tell us about your losers. If you have had none and been perfect, can the rest of us rub your head so your luck runs off on us?

 

[RENTER]

Or people who have the crap luck hit the age when they can start pulling equity just after a crash. "Wait for the rebound" only works so often in a lifetime.

During the housing bubble, circa 2003, my friends were pressuring me to join them purchasing multiple houses with stated-income, interest-only loans. "You just have to hold for five years and you'll DOUBLE YOUR MONEY! Just sign your name really, really large!" (The "sign your name really, really large" bit is a direct quote from one of my friends. My wife and I still say that to each other when suggesting something we know is foolhardy.)

Five years later, they lost everything and I was still on track. Same basic premise.

You are so right. It just amazes me that people have no memory of the bad times they lived thru and think life is a bowl of cherries. I have been saying for years and it has been confirmed by recent studies that excessive pot smoking fries the memory.

I tell young people all the time, each generation repeats the same mistakes as the previous generation. Learn what those mistakes were and how some were able to take advantage. Then recognize those mistakes and stay away and take advantage. It takes courage to stand up against the tide, but tides always retreat.

 

[jabberwocky]

Oh by the way, please tell us about your losers. If you have had none and been perfect, can the rest of us rub your head so your luck runs off on us?

Sure. NTR, VZ and VAC have been absolute dogs for me. Worst quarter was 2020 Q1 with about a 20% drawdown. I would love to say my portfolio is exciting, but it’s pretty boring to be honest. Currently have 27 positions (6 are ETFs). There is minimal technology - I unfortunately missed out on Nvidia and the M7). I made a grand total of 18 trades last year.

No leverage and I usually sit between 5-20% cash (currently at 12%). No bonds since I don’t like the risk profile with potential inflation and I have a defined benefit pension which effectively is like a fixed income investment for me. I will occasionally do a covered call position if I’m ready to get out.

If you like to nerd out in the risk statistics my sharpe ratio over the past year has been 3.58 (S&P is 1.6) and the Sortino Ratio (measures the downside risk better) is 15.6 (vs. 2.91 for S&P).

I think you’ll probably understand pictures better, so here are the historical annualized returns for my portfolio (in blue) going back to the inception of this account (when I fired my financial advisor mid-2019). Pretty much dead on with the S&P (green) over this time period with significantly lower risk.

Now I’ve showed you mine - care to share yours?