[2020] A little stock market sense

[VacationForever]

The conventional wisdom is to be heavily invested in equities (90 - 100%) early in life and then shift to fixed income later for a more predictable and reliable income stream.
It's a different risk factor for each individual. Sure, it's possible to run out of money with any asset class unless you have a guaranteed annuity.
I'm also around 70% equities but looking to make the nest egg more reliable - annuities, bonds, CD's, etc.

I did pull out about 15% of our investments when we retired and turned that into deferred income annuities that will start paying me in 2 years time from today. I did not count that in my mix, but I should. Based on that, we should go with 80% equities in our managed accounts.

 

[geekette]

... Recently, I bought some MO for the long term portfolio. A stock that everybody loathes, but. . . . 9% dividend, and 55 dividend bumps in the last 52 years, including one this year.

Not everybody loathes it. Many long haul div investors like it a lot.

...Can you buy for long term dividends? Yes, assuming you have the cash flow to invest on a long term basis.

Decades of DCA through working years. Compounding dividends are the secret sauce, adding to the pot whether or not the investor is adding. Perfect for a Roth.

 

[TravelTime]

sometimes it's difficult to predict the future of "tired nags" and thoroughbreds
10 or 15 years ago people thought General Electric was a good stock for earnings growth and it would be very foolish to buy Tesla (or Amazon!)

Apple used to be a tired nag 15 years ago,

 

[Luvtoride]

Not necessarily, I pay our FA based off the value of the portfolio, not the trades (which are no cost to us). We rebalance looking ahead to market trends.

I’m with you Dr Q. I don’t have the time (not yet retired) or the knowledge to efficiently/ strategically allocate and invest my portfolio so I pay a Financial Advisor to do it. We discuss all aspects of the strategies and they are based on our risk tolerance. I feel very comfortable with this approach and know that the price I pay is worth the piece of mind for professional management and very good advice.


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[PigsDad]

This is why I accepted an annuity with a 50% Survivor benefit for my 20 year younger ex-wife instead of a lump sum when I retired at age 65 twenty one years ago. I have never regretted my choice...

Yes, but what was the effective return on your annuity when you bought it? I'll bet anything it was a heck of a lot higher then than what is available now, with interest rates so low. If you had to buy the same annuity today, would you have had the principle needed to produce the same income? Most likely not.

Today's investment environment is very different, so while annuities certainly can provide a secure, stable income, most people need higher returns in order to not run out of money in their retirement. Annuities can still be included as a portion of a retirement portfolio, but I think few today can go your route of 100% annuities like you did 20-30 years ago.

Kurt

 

[DrQ]

I’m with you Dr Q. I don’t have the time (not yet retired) or the knowledge to efficiently/ strategically allocate and invest my portfolio so I pay a Financial Advisor to do it. We discuss all aspects of the strategies and they are based on our risk tolerance. I feel very comfortable with this approach and know that the price I pay is worth the piece of mind for professional management and very good advice.


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Unfortunately, it took a couple years to find a FA who was worth a damn.

 

[bogey21]

Yes, but what was the effective return on your annuity when you bought it? I'll bet anything it was a heck of a lot higher then than what is available now, with interest rates so low. If you had to buy the same annuity today, would you have had the principle needed to produce the same income? Most likely not.

Truth is I have no idea and didn't really care. What incented me to take the annuity was a guaranteed 3% annual cumulative COLA. After 20 years the COLA payment I received last January 1st was 60% of my base pension. Next January 1st I will receive a payment equal to 63% of my annual pension. I have no earthly idea how to factor that into calculating an effective rate of return...

George

 

[Ralph Sir Edward]

... Recently, I bought some MO for the long term portfolio. A stock that everybody loathes, but. . . . 9% dividend, and 55 dividend bumps in the last 52 years, including one this year.

Not everybody loathes it. Many long haul div investors like it a lot.

...Can you buy for long term dividends? Yes, assuming you have the cash flow to invest on a long term basis.

Decades of DCA through working years. Compounding dividends are the secret sauce, adding to the pot whether or not the investor is adding. Perfect for a Roth.

Which is where mine is in. (Roth) Of course ALL my financial investments are in a Roth. . . .

 

[VacationForever]

Yes, but what was the effective return on your annuity when you bought it? I'll bet anything it was a heck of a lot higher then than what is available now, with interest rates so low. If you had to buy the same annuity today, would you have had the principle needed to produce the same income? Most likely not.

Today's investment environment is very different, so while annuities certainly can provide a secure, stable income, most people need higher returns in order to not run out of money in their retirement. Annuities can still be included as a portion of a retirement portfolio, but I think few today can go your route of 100% annuities like you did 20-30 years ago.

Kurt

I did luck out when I bought my annuities 4 years ago. A highly rated company was paying 50% more than their competitors and I jumped on the purchase. 3 months later their quotes dropped back to where other companies were paying. Their payout is nowhere near what Bogey21's but it is not bad in the current 0 interest rate environment.

 

[Brett]

"U.S. stocks landed at record-setting year-end levels after a wild 2020 that veered from a bear market to new record highs"

https://www.wsj.com/articles/stocks-surge-in-crazy-year-for-financial-markets-11609497000

I hope it's not a giant financial bubble waiting to burst ....

 

[bogey21]

I did pull out about 15% of our investments when we retired and turned that into deferred income annuities that will start paying me in 2 years time from today. I did not count that in my mix, but I should. Based on that, we should go with 80% equities in our managed accounts.

I love your strategy particularly the deferred annuities. The only thing I would do different is add some gold and Bitcoin (but not at today's price) and maybe reduce the 80% equities as time rolls on...

George

 

[Luvtoride]

I love your strategy particularly the deferred annuities. The only thing I would do different is add some gold and Bitcoin (but not at today's price) and maybe reduce the 80% equities as time rolls on...

George

George, I agree with you on Bitcoin/ cryptocurrency. Maybe on a bit of a pullback but I think it’s going to continue to rise as others have noted here. I just bought Grayscale BTC Trust this week and am glad to finally have some exposure there.

Also, check out a stock called RIOT, A cryptocurrency mining company. Fascinating stuff that will continue to prosper as these currencies become more mainstream and continue to rise.


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[bogey21]

The spread between the Grayscale Trust and Bitcoin is pretty wide...

I'm about 50-50 between Gold and Silver. Right now I think Gold is a better buy...

George

 

[bbodb1]

Say what you will about President Trump (and I know several here have plenty to say), but the stock market has prospered during his presidency. That is a fact.
Now to what extent President Trump's policies and decisions may (or may not) have impacted market performance - that is another question entirely.

But with the change in administration pending, the markets are likely to be a bit unsettled for a bit.
Let's see what happens assuming the elect is dropped from President Elect Biden.

And let's be very clear about this - my comments are made from the FINANCIAL MARKET performance point of view exclusively.
I'd support George McGovern for President if his policies would make financial markets happy......

 

[Talent312]

In the next few months, I'll be pulling about 10% out of our portfolio.
I'll be using it for major home improvement projects with a 1:1 value.

So, in one sense, I'm converting a liquid equity to an illiquid equity.
But at least, it's one I get to live in it for the duration.
,

 

[bogey21]

Increases in the price of Gold, Silver, Bitcoin and Houses tell me a lot of people are worried about the long term effect of the Government's deficit spending and the Federal Reserve's debt purchase activities. All I can say is be nimble. Who know how the market will react long term to all of this...

George

 

[bbodb1]

In the next few months, I'll be pulling about 10% out of our portfolio.
I'll be using it for major home improvement projects with a 1:1 value.

So, in one sense, I'm converting a liquid equity to an illiquid equity.
But at least, it's one I get to live in it for the duration.
,

I certainly hope your illiquid equity is a solid one! Unless (of course) your home improvement project is a pool - which would exist in both states....

 

[Ralph Sir Edward]

I certainly hope your illiquid equity is a solid one! Unless (of course) your home improvement project is a pool - which would exist in both states....

Which state will you have to pay the taxes to?

 

[VacationForever]

Increases in the price of Gold, Silver, Bitcoin and Houses tell me a lot of people are worried about the long term effect of the Government's deficit spending and the Federal Reserve's debt purchase activities. All I can say is be nimble. Who know how the market will react long term to all of this...

George

I won't touch Bitcoin with a 10-foot stick. It is not "real" money and has no real worth. It is about as tangible as ether.

 

[HitchHiker71]

Increases in the price of Gold, Silver, Bitcoin and Houses tell me a lot of people are worried about the long term effect of the Government's deficit spending and the Federal Reserve's debt purchase activities. All I can say is be nimble. Who know how the market will react long term to all of this...

George

Agreed - I actually think the days of the Fed greenback are numbered - just a question of how and when at this point.


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[HitchHiker71]

I won't touch Bitcoin with a 10-foot stick. It is not "real" money and has no real worth. It is about as tangible as ether.

Just wait until the world moves away from the Fed greenback as the world reserve currency and QE is no longer possible - then we will see just how worthless the greenback is in reality.

At that point, cryptocurrency is likely to be worth far more than it is today and the greenback will likely cease to exist as we know it for all intents and purposes. When the Fed literally creates trillions of Fed dollars out of thin air via QE to monetize runaway national government spending, and is endlessly increasing the money supply over time in the process, what is the difference between the ether cryptocurrency and the Fed dollar?


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[bnoble]

To badly misquote Churchill: "The US dollar is the worst form of currency, except for all the others."

 

[easyrider]

Increases in the price of Gold, Silver, Bitcoin and Houses tell me a lot of people are worried about the long term effect of the Government's deficit spending and the Federal Reserve's debt purchase activities. All I can say is be nimble. Who know how the market will react long term to all of this...

George

I'm not a fan of the uninsured cryto's because of the ability of others to hack and steal it. Every year you read about multiple thefts of billions of dollars of these. When the most sensitive and protected cpu systems in the USA can be hacked what chance does a person with a $1000 cpu on a shared system have ?

Bill

 

[HitchHiker71]

To badly misquote Churchill: "The US dollar is the worst form of currency, except for all the others."

An excerpt from the linked article below from back in 2019:

“Meanwhile, Bank of England Gov. Mark Carney proposed in a speech on Aug. 23 at the Kansas City Fed’s annual summit in Jackson Hole, Wyo., that central bankers around the globe could coordinate to issue a digital “Synthetic Hegemonic Currency” to replace the dollar as the world’s reserve currency. He suggested that such a tool could eliminate problems that have resulted from the U.S. dollar’s serving that purpose, from erratic capital flows in emerging-market economies to an overvaluation of the greenback that can suppress American exports.”

Why the coming recession could force the Federal Reserve to swap greenbacks for digital dollars

Paper bank notes are being upgraded for a digital future around the world.

www.marketwatch.com

It’s not a matter of if, it’s a question of when.


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[Ralph Sir Edward]

An excerpt from the linked article below from back in 2019:

“Meanwhile, Bank of England Gov. Mark Carney proposed in a speech on Aug. 23 at the Kansas City Fed’s annual summit in Jackson Hole, Wyo., that central bankers around the globe could coordinate to issue a digital “Synthetic Hegemonic Currency” to replace the dollar as the world’s reserve currency. He suggested that such a tool could eliminate problems that have resulted from the U.S. dollar’s serving that purpose, from erratic capital flows in emerging-market economies to an overvaluation of the greenback that can suppress American exports.”

Why the coming recession could force the Federal Reserve to swap greenbacks for digital dollars

Paper bank notes are being upgraded for a digital future around the world.

www.marketwatch.com

It’s not a matter of if, it’s a question of when.


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And the black market will trade in gold/silver. There will always be a market for invisibility. Cash serves it now, despite all the Federal regulation to try and stop it, but when cash disappears, metals will, once again, take over. . . .