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Hog Obituary posted:Ok, so by putting 40% into stocks I should be content to lose 50% of that 40%. That seems a little more than I want to lose, but not insane. So perhaps I would put 20-30% of my total cash into the market? It all depends on your current financial situation just think of it as fun money, it helps the buy and hold mentality that's required for index investing.
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Jul 22, 2014 03:16
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Hog Obituary posted:I can afford to lose some of this money, but I would be sad to see it cut in half. If I absolutely needed it and it was 10% below where I started, I could live with that, but it kinda sucks. If I absolutely needed it and it was 40% below where I started that would hurt a lot. To me this says you're in the realm of my middle suggestion. You could get that by keeping half in cash and half in the Vanguard Life Strategy Conservative Growth fund. Stocks would be 20% of your portfolio, so if stocks dropped by half you'd be 10% below where you started. And in that situation bonds might well go up, reducing the pain. More risky alternatives with (probably) higher expected return would be the Life Strategy Income Fund by itself (80% bonds, 20% stocks) or a combo of cash and e.g. the Life Strategy Moderate Growth fund.
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Jul 22, 2014 04:09
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slap me silly posted:To me this says you're in the realm of my middle suggestion. You could get that by keeping half in cash and half in the Vanguard Life Strategy Conservative Growth fund. Stocks would be 20% of your portfolio, so if stocks dropped by half you'd be 10% below where you started. And in that situation bonds might well go up, reducing the pain. Thanks, this seems like a reasonable spectrum to work with. 
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Jul 22, 2014 06:49
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pig slut lisa posted:As Warren Buffett once said, "Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market." That doesn't really say anything meaningful to the retail investor. Building an investment portfolio comes down to weighing various asset classes in a manner that has a risk/return characteristic you're comfortable with. It's silly to say that you must be comfortable with an arbitrary risk threshold to invest in equities. This glibness extends to posters itt advising investment newbies on what fund(s) to pick for their 401k etc. There's a tendency to just look at fund strategy and ER and telling the new faces what funds to pick. Look at target date funds, two funds with the same target date and ER might have drastically different risk return profiles sure to different glide paths. I'd strongly recommend people to at least look at the prospectuses of the funds available to them. shrike82 fucked around with this message at 08:02 on Jul 22, 2014 |
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Jul 22, 2014 07:55
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shrike82 posted:That doesn't really say anything meaningful to the retail investor. I completely disagree that that quote doesn't have any meaning for the personal investor. The takeaway from that quote is not "sit and think realllll hard about exactly how much money you're willing to lose, and it better be the number Warren Buffett says." The takeaway is "you may encounter a severe market drop at some point, so you should not be buying in unless you feel your personal timeline has enough wiggle room to account for such a drop."
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Jul 22, 2014 13:29
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pig slut lisa posted:I completely disagree that that quote doesn't have any meaning for the personal investor. The takeaway from that quote is not "sit and think realllll hard about exactly how much money you're willing to lose, and it better be the number Warren Buffett says." The takeaway is "you may encounter a severe market drop at some point, so you should not be buying in unless you feel your personal timeline has enough wiggle room to account for such a drop." I agree. What Buffet is saying is doing stuff like pulling your money out of the market after the dot com and real estate crashes is stupid. Plenty of personal investors did and they lost out on huge gains during subsequent growth.
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Jul 22, 2014 13:33
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And it's a meaningless statement because most retail investors do panic as you say in extreme bear markets. Should we just tell them to forget about investing in equities? I'm looking at the depth of advice (superficial) posters are giving to hog obituary and it's frightening to me that he's deciding on his portfolio based on glib posts like yours. shrike82 fucked around with this message at 13:41 on Jul 22, 2014 |
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Jul 22, 2014 13:37
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Well because you're an expert, tell us how exactly an investor is supposed to have success in equities without being willing to ride out a downturn. And please. No glibness.
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Jul 22, 2014 13:43
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shrike82 posted:And it's a meaningless statement because most retail investors do panic as you say in extreme bear markets. Should we just tell them to forget about investing in equities? So because most individual investors panic sell during big downturns, I should...not tell people to be prepared to hold during big downturns? What am I missing about your argument?
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Jul 22, 2014 13:48
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pig slut lisa posted:The takeaway from that quote is not "sit and think realllll hard about exactly how much money you're willing to lose, and it better be the number Warren Buffett says." Whoops because that's the takeaway you've imparted to him. Great job! Hog Obituary posted:Ok, so by putting 40% into stocks I should be content to lose 50% of that 40%.
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Jul 22, 2014 13:49
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You're a retard. While the exact amount of the drop is unknown, a 50% drop in stocks is completely possible and withdrawing at that point would be disastrous for future returns. What would you suggest instead? Go ahead and tell him how to time the market, and put some real thought into it.
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Jul 22, 2014 13:52
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Great reading comprehension retard, I'm not an advocate of market timing.
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Jul 22, 2014 13:54
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shrike82 posted:Great reading comprehension retard, I'm not an advocate of market timing. Are you an advocate of warning people that massive market drops are possible and that investing is a poor choice if they will react to massive market drops by panicking?
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Jul 22, 2014 13:55
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shrike82 posted:That doesn't really say anything meaningful to the retail investor. Yeah this isn't a bunch of vague bullshit that gives no real advice. 
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Jul 22, 2014 13:56
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I'm not the one giving investment advice to a neophyte without trying to understand his risk-return profile. Stuff like this is dangerous slap me silly posted:You could get that by keeping half in cash and half in the Vanguard Life Strategy Conservative Growth fund. Stocks would be 20% of your portfolio, so if stocks dropped by half you'd be 10% below where you started. And in that situation bonds might well go up, reducing the pain. shrike82 fucked around with this message at 14:02 on Jul 22, 2014 |
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Jul 22, 2014 13:59
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shrike82 posted:I'm not the one giving investment advice to a neophyte without trying to understand his risk-return profile. Anyone building him specific funds and percentages is certainly oversimplifying it unless it's just being used as an example and not a specific recommendation, which is usually implied. Pointing out he shouldn't be putting a majority into stocks if he may need the money in a few years is good advice though. Unless you think he could pick funds that won't lose a great deal of value in the next few years, guaranteed, by looking at charts.
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Jul 22, 2014 14:02
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shrike82 posted:I'm not the one giving investment advice to a neophyte without trying to understand his risk-return profile. I feel like he's been pretty clear about his risk-return profile? And ultimately, he needs to be able to make the decision himself. People are telling him the key thing he must understand before investing, the assumptions that go behind it can vary based on his own judgement but going off of Warren Buffet's number as a starting off point is reasonable. I don't know what you're so up in arms about; if you have better advice, why don't you post it as an example to the rest of us of how to do it?
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Jul 22, 2014 14:04
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Look at my post above, people are advising him on an asset weight purely on the basis that the maximum drawdown for the equity allocation is 50%. A specific number which came about because of what pig slut Lisa said. That's terrible and dangerous advice that totally ignores the guy's investment needs and his risk profile.
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Jul 22, 2014 14:05
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shrike82 posted:Look at my post above, people are advising him on an asset weight purely on the basis that the maximum drawdown for the equity allocation is 50%. A specific number which came about because of what pig slut Lisa said. Then give better advice, because he's detailed his needs and situation pretty clearly.
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Jul 22, 2014 14:07
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You have a good understanding of his needs? Why don't you tell me what his return requirements are? Because I spent some time going through his posts in the thread and he hasn't explained what his target returns are. The first step to giving good investment advice is getting a good picture of the person's needs. I don't believe I or any of you have that.
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Jul 22, 2014 14:11
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The bottom line is he needs to read some of the books in the OP, which was said to him. People made an effort to give some level of advice which is in fact useful in the abstract because he didn't just say "okay I'll go read them then come back." If you're going to poo poo on that effort, you can get involved yourself and ask the questions you need to give him the expert advice that will provide his "return requirements." Unless we are just going to refuse to discuss his situation, the bar for you is pretty low if you say the advice given so far is terrible. I'd legitimately be interested to see how you get the info you need from him and what kind of advice you'll ultimately give, because maybe it will be great.
Nail Rat fucked around with this message at 14:25 on Jul 22, 2014 |
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Jul 22, 2014 14:20
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Nail Rat posted:Then give better advice, because he's detailed his needs and situation pretty clearly. You must not read DnD because this is Shrike82's entire schtick. He poo poo posts criticisms implying everyone is clueless (but him of course) while never offering even the vaguest of substance himself. He didn't get that massive red title for nothing, folks.
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Jul 22, 2014 14:40
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Some quick thoughts given that I work in finance (albeit institutional facing) and have a CFA. Big picture, a lot of people look at the following elements when building an investment portfolio (term of art - investment policy statement):
The very first step - what everyone's missed so far in giving hog obituary advice is actually getting a clearer picture of his investment goals. He's mentioned a 5 year time horizon and some potential goals e.g., home purchase. How much does he need his current financial wealth to grow? And by extension, what kind of returns does he need? Then, think about his risk profile. The problem with all the discussions about risk so far is that it's purely been tied to drawdowns. You need to tie risk with return i.e., would he be willing to accept x% mean returns in exchange for y% volatility? Why am I making GBS threads on people? Look at the advice about 50% cash + 50% various Vanguard funds with different risk characteristics? Why 50% cash? Changing the weight of cash in of itself would affect the overall portfolio risk-return characteristics. And the biggest thing is that he has a tentative 5 year time horizon. If that's definite, that's already a showstopper. And people seemed to have ignored that. shrike82 fucked around with this message at 15:04 on Jul 22, 2014 |
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Jul 22, 2014 14:47
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shrike82 posted:Some quick thoughts given that I work in finance (albeit institutional facing) and have a CFA. The way I read it was that he was looking at this particular investment in a sandbox as something he would like to use in 3-5 years, he doesn't need for it to grow at any rate, he'd just like it to do something other than sit there. This is why his strategy is dictated by how much he's willing to lose for what upside. He gave an example of his desired spread as 10% loss, 20% gain per annum. I'd expect someone who was able to tell you exactly % mean returns for % volatility to be able to construct a much more detailed investment plan by themselves. As for the specific fund advice given, I'm not saying I agree with the 50% cash/50% index fund advice. But even with a 5 year time horizon, 10% in stocks balanced out with bonds/cd's isn't necessarily a bad idea. Hog Obituary: Please correct me if I'm wrong, I may be making too many assumptions. Rurutia fucked around with this message at 15:11 on Jul 22, 2014 |
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Jul 22, 2014 15:06
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You're making a lot of assumptions. Again, you might be a seasoned investor comfortable with them but it's very helpful to lay them out explicitly to someone like hog obituary since he's not familiar with them. The biggest potential for misunderstanding with a 50 cash - 50 vanguard balanced fund is that the fixed income portion of the balanced fund isn't riskless. Notice how statements were being made upstream about hypothetical drawdowns coming only from the equity portion of the fund? To use the Vanguard Conservative Growth Fund as an example, the 60% allocation to fixed income is in their Total Bond Market funds. Definitely risk there.
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Jul 22, 2014 15:22
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Rurutia posted:He gave an example of his desired spread as 10% loss, 20% gain per annum. I'll pay anyone who can come up with a portfolio with this spread 1% of everything I invest. drat.
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Jul 22, 2014 15:26
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I'm leery about something like 90% cash equivalents 10% equities. Is he happy about taking on downside risk for the likelihood of not making any material gain?
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Jul 22, 2014 15:31
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shrike82 posted:You're making a lot of assumptions. Again, you might be a seasoned investor comfortable with them but it's very helpful to lay them out explicitly to someone like hog obituary since he's not familiar with them. I'm not making any assumptions wrt to investments, my assumptions were about what he meant. My post was about your allegation that people were posting without understanding his investment goals, more specifically about these questions: "How much does he need his current financial wealth to grow? And by extension, what kind of returns does he need?". I agree about the last part, which is why I said that I didn't agree with the specific 50%cash/50%index fund advice... but since I didn't want to put in the effort to spell out exactly what was wrong with it, I didn't post at all. shrike82 posted:I'm leery about something like 90% cash equivalents 10% equities. Pretty sure he said he's ok with it, but again, I might be misreading his posts. Nail Rat posted:I'll pay anyone who can come up with a portfolio with this spread 1% of everything I invest. drat. Haha, agreed. VVV I don't even know what else to say to you. Your supporting arguments are generally right, but what you're criticizing isn't what happened or isn't appropriate to the discussion or the context of this forum. You still don't see that's what's going on here. Rurutia fucked around with this message at 16:14 on Jul 22, 2014 |
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Jul 22, 2014 15:41
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A big part of retail* investing is behavioral modification and cognitive biases. Saying that you've asked him his investment goals and he responded with "I want 20% return and am willing to lose 10%" isn't a good way to facilitate good investing - A) You need to discuss what realistic risk/return numbers are for various types of portfolios B) Based on A), ask him to re-evaluate his targets and see if he's willing to modify them C) This is arguably the biggest - what people say they're comfortable in terms of downside risk is often not what they're comfortable with in practice. This requires a lot of work to monitor and adjust. Now, no one's saying that we need every single post ITT to be 100% bullet proof, fiduciary advice. But it'd be great if people didn't give specific investment advice without having stuff like this in mind because you have the potential of ruining someone's financial security. *Well, institutional as well once you start looking at investment committees but that's out of scope here.
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Jul 22, 2014 15:50
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shrike82 posted:C) This is arguably the biggest - what people say they're comfortable in terms of downside risk is often not what they're comfortable with in practice. This requires a lot of work to monitor and adjust. This sounds like something that a (fee-only, hopefully) financial advisor is for though. At the end of the day, in order to have a good-faith discussion here we need to be able to take what someone says at face value.
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Jul 22, 2014 16:02
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I understand the lack of clarity about my situation. I'm probably not as seasoned or smart as Nail Rat thinks, and probably not as much of a neophyte as shrike82 thinks. I've spent 4 years buying and selling stocks, funds, and bond funds (usually doing about 3-5 individual buy/sells a year). I've always felt like I was flying a little blind, and going on my gut too much. I've done fine with the stocks I've bought because the market as been on an upward swing since 2010. Anytime I would ask on the internet about getting a professional to do it for me, the entire internet has an aneurism and tells me that professionals know nothing and they can't beat the market and you gotta just do index investing. So I started out asking about that and then we went down this long and windy trail about my own personal situation. I saw a professional financial adviser once and he tried to sell me indefinite life insurance as an investment vehicle and tax shelter. I wasn't comfortable with it since I barely understood it. I think that's something only mega-rich people do? Rurutia posted:The way I read it was that he was looking at this particular investment in a sandbox as something he would like to use in 3-5 years, he doesn't need for it to grow at any rate, he'd just like it to do something other than sit there. This is why his strategy is dictated by how much he's willing to lose for what upside. He gave an example of his desired spread as 10% loss, 20% gain per annum. I'd expect someone who was able to tell you exactly % mean returns for % volatility to be able to construct a much more detailed investment plan by themselves. Here are my inputs to Vanguard's risk calculator thingy  The recommendations change at $33,000 -- below $33,000 they put you into the single Vanguard LifeStrategy Income Fund (VASIX). Above 33,000 you get the following code:So, I'm pretty comfortable going to a professional if somebody has a recommendation on the type of professional... but I assume they just do a more complicated version of this calculator and ask me more personal questions, right?
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Jul 22, 2014 16:23
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Look for fee only investment advisors in your area. Fee only means they won't get commissions for pushing products on you.
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Jul 22, 2014 16:28
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As another guy in finance I just wanted to chime in and say that shrike82 is completely correct. I understand that people here have good intentions, and I agree with the book suggestions and typically the broad suggestions given for retirement planning. However, sometimes there are very specific recommendations given without asking the correct questions, and it's pretty irresponsible.
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Jul 22, 2014 16:44
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I don't think you hotshot finance gurus followed the whole conversation, or grasp the intent of this thread or the ability of the people with questions to critically evaluate what they hear.shrike82 posted:I have close to 40 grand in Vanguard mutual funds. I'm planning to liquidate them but I don't know how selling them works. Also I don't actually think you're a hotshot finance guru. I would strongly recommend anyone to read Bernstein instead of talking to some loudmouth who's just a few years out of college. Hogs, if you can find a pro who will help you better understand your personal timeline, your risk tolerance, and all the risks of different types of portfolios, that would be helpful. Some people prefer to get that from reading, hence the book recommendations - others prefer to talk to the experts in person. On the other hand if you find a "pro" who wants to tell you what to do or sell your their stuff, run like hell (like you did).
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Jul 22, 2014 17:00
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Ok, so just read Four Pillars? It does sound like nobody is suggesting I walk into Wells Fargo and say, "here's my money, put it somewhere smart so I don't have to think about it" -- that's what I *actually* want to do but people seem to advise against it.
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Jul 22, 2014 17:14
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Hog Obituary posted:Ok, so just read Four Pillars? What people are trying to say is that life is full of bullshit you don't want to do, and in this particular instance it would probably cost you hundres of times more over your lifetime than a lot of the other poo poo you don't want to do either. So yeah, suck it up and spend 10 hours of your life researching some basic stuff, and end up with a Vanguard account and a total portfolio allocation you are happy with, and then spend 2 hours a year rebalancing everything. Your rate for the time you spend will be at least $1000/hour over your life.
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Jul 22, 2014 17:17
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Hog Obituary posted:Ok, so just read Four Pillars? It would definitely not hurt to read 4 Pillars. Also the reason people advise you against that second thing is because it's how thousands of people have lost millions of dollars to "professionals" who had no fiduciary duty to their clients plus a strong incentive to rip them off. Nobody can possibly know what would be smart to do without substantial input from you, which means you understanding what you want.
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Jul 22, 2014 17:17
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Droo posted:What people are trying to say is that life is full of bullshit you don't want to do, and in this particular instance it would probably cost you hundres of times more over your lifetime than a lot of the other poo poo you don't want to do either. Yes, this is one of the most important things you should learn yourself. It can easily cost you $100k+ during your lifetime if you are in funds with heavy fees handled by advisers who don't have your best interests in mind.
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Jul 22, 2014 17:34
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slap me silly posted:Also I don't actually think you're a hotshot finance guru. I would strongly recommend anyone to read Bernstein instead of talking to some loudmouth who's just a few years out of college. hahaha shrike82 posted:I have a large pile of cash (~100K) doing nothing - is now a good time to go long some index funds? e: A three year old post wouldn't be relevant unless someone were claiming to have a financial expertise certification that takes a few years to acquire and requires a certain base level of knowledge to even begin to attempt, which...well, what a coincidence! pig slut lisa fucked around with this message at 18:12 on Jul 22, 2014 |
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Jul 22, 2014 17:59
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Toasty!
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