# All Gains in 2018 Are Officially Gone As Of Wed. 11/22/18



## fmdog44 (Nov 21, 2018)

Well so much for this year's gains.


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## C'est Moi (Nov 21, 2018)

The sky is falling.   Along with my investments.


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## mathjak107 (Nov 22, 2018)

we got way to far ahead of ourselves . there is always a reversion back to the mean at some point .  the last 10 years were so exceptional they  had to start averaging out.

funny though , my conservative income model  portfolio is down 4% . my 100% equity growth model is  down 2% ..

that is because the conservative income model which is only 25% equities never developed that cushion . the growth model had a cushion so even though it fell more it fell from much higher gain levels


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## Aunt Bea (Nov 22, 2018)

It seems like my _portfolio _has always been two or three steps forward and one step back.

I watch the markets and get a little nervous like anyone else then I look at where I started compared to where I am.

Pick a sound strategy/allocation and stick with it, feed the pig and someday the pig will feed you!







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## mathjak107 (Nov 22, 2018)

that is because 80% of the time your balance will always be somewhere between the last low and last high . ----always

this is why good portfolio construction  provides the most direct root to those in between points  . you have more conservative models  which take a straighter path to those areas we spend 80% of the time  without climbing the peaks , falling in to the valleys and ending up most of the time at the same in between point. --and no i don't mean using fixed income only .


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## Uptosnuff (Nov 23, 2018)

I have got to the point I won't look at my 401k anymore.  I still have 2 1/2 years before I retire and right now I'm rather glad of that.


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## mathjak107 (Nov 24, 2018)

that is a normal human reaction . we avoid looking .   we know trees don't grow to the sky and things have to level out when they get to far ahead of themselves . yet we cringe when it does  ha ha. we had a decade of way above average returns that need to eventually revert back to the mean .

a nicely designed balanced portfolio works just fine in retirement and always did .


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## Uptosnuff (Nov 24, 2018)

I like the balance of my 401k currently, I don't have any qualms about that.  I know that the market goes through highs and lows and corrections.  But sitll, when I retire I want to go out on a high and not on a correction.


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## mathjak107 (Nov 24, 2018)

Uptosnuff said:


> I like the balance of my 401k currently, I don't have any qualms about that.  I know that the market goes through highs and lows and corrections.  But sitll, when I retire I want to go out on a high and not on a correction.



we all wanted to retire at a high , but for most we will not catch a high and if we do within a few years you may be in a dip anyway . it is just a fact of life depending on markets ,rates and inflation for your income


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## Aunt Bea (Nov 24, 2018)

Uptosnuff said:


> I like the balance of my 401k currently, I don't have any qualms about that. I know that the market goes through highs and lows and corrections. But sitll, when I retire I want to go out on a high and not on a correction.



I'm not sure how much money you are talking about or how much you will rely on your 401K during retirement but I would try not to delay my retirement based on market fluctuations.

Start looking at different strategies to draw from your 401K during retirement. The old conventional wisdom of drawing 4% adjusted for inflation may not be a good choice if you retire early, the markets are in a slump, yields are low, etc... Look at your retirement income and see if you can enjoy your early years in retirement with a 1, 2 or 3% draw. Also, consider a draw based on a three year rolling average of your 401K balance to help smooth out the market highs and lows.  Keep running the numbers until you find a strategy that will work for you and your situation.

Good luck!


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## mathjak107 (Nov 24, 2018)

actually if markets are in a slump 4% is no problem since it is based on the reduced balance .

more important would be taking a raise as things go back up .  the rule of thumb is if you retire in a slump take your 4%  inflation adjusted . when you recover to the point of being 50% higher then you started  take a 10% raise  plus any inflation adjusting .

repeat this every 3 years .

retiring in a slump  can leave you drawing to little down the road when things recover  so taking raises is an important part ..


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## fmdog44 (Dec 3, 2018)

Last week ending 11-30 brought the markets back in to positive area. Good reason to never panic sell.


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## mathjak107 (Dec 3, 2018)

amateurs panic sell .  then they blame markets . this is where many are penny wise and pound foolish . they have no skill or stomach for managing their own money . yet they won't pay the less than 1% a year that many great mangers charge to keep them from themselves .


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## Uptosnuff (Dec 3, 2018)

Aunt Bea said:


> I'm not sure how much money you are talking about or how much you will rely on your 401K during retirement but I would try not to delay my retirement based on market fluctuations.
> 
> Start looking at different strategies to draw from your 401K during retirement. The old conventional wisdom of drawing 4% adjusted for inflation may not be a good choice if you retire early, the markets are in a slump, yields are low, etc... Look at your retirement income and see if you can enjoy your early years in retirement with a 1, 2 or 3% draw. Also, consider a draw based on a three year rolling average of your 401K balance to help smooth out the market highs and lows.  Keep running the numbers until you find a strategy that will work for you and your situation.
> 
> Good luck!



Aunt Bea, thank you for the info.  However, my retirement date has nothing to do with my 401k, or the markets.  In the company I work for, it all depends on your years of service plus your age.  I have 18 1/2 years of service and I'm 59.  When my years of service = 20, I reach a "rule" where I can start drawing a pension when I'm 62.  Also, my medical benefits will transfer over in retirement.  So it all sort of "comes together for me" in about 2 1/2 years.  It won't be a huge pension, but will make life easier and more secure and I count my blessings that I will get one.


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## oldman (Dec 4, 2018)

I never used any type of strategy. I always believed in divesting in as many sectors of the market that I could and then moved some of the money in the weaker sectors of my portfolio to the sector that was gaining. Not all of it, just some of it. That's not a strategy, maybe just more of a plan that I used. I tried using the strategy "Dogs of the Dow" once. Let's just say that didn't work out too well.


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## mathjak107 (Dec 4, 2018)

same here , the dogs of the dow were dogs for a reason


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## Don M. (Dec 4, 2018)

With all the nonsense that is going on in Washington, and some of our major corporations, it's a wonder that we haven't seen a repeat of 2007/2008...Yet.  I have a bad feeling that we are on the doorstep of a major decline in the markets, and I'm thinking seriously about moving everything into Money Markets/Municipal Bonds/Treasuries, etc., and preparing for many months of "riding it out".


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## mathjak107 (Dec 4, 2018)

that is rarely a good idea . over and over people lock in what they are down and getting back in again at lower prices rarely happens because markets always look like there is no bottom . then before anything changes , BOOM ,  they reverse on a dime with the biggest gains . it ends up just shooting you in the foot rather then preserve anything


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## Don M. (Dec 4, 2018)

mathjak107 said:


> that is rarely a good idea . over and over people lock in what they are down and getting back in again at lower prices rarely happens because markets always look like there is no bottom . then before anything changes , BOOM ,  they reverse on a dime with the biggest gains . it ends up just shooting you in the foot rather then preserve anything



Yeah, trying to "time" the markets is wishful thinking.  I've ridden the ups and downs most of the time, over the past few decades, with minimal issues.  I did get out of the markets for almost a year in 2007, and lost a minimum, and I have a gut feeling that we are headed for another such extended downturn.  Today is another Miserable day on the markets, and by the end of this week, I may start to "chicken out" with at least part of our holdings.


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## mathjak107 (Dec 4, 2018)

fight the urge ..... our brains hate losing money more than making money and it will burn you every time . read jason zweigs book your money your brain . it is fascinating what the brain does to us .

hypothetically we know what is good investor behavior . but when the stress of  real money is on the line different parts of our brain take over . the thought of being down is actually repulsive  to our brain and causes different areas of the brain to come in to play then made the decisions when we had no stress .

this part of the brain causes us to make flawed choices and bailing out is one of them .


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## Don M. (Dec 4, 2018)

mathjak107 said:


> fight the urge ....



Today's market performance was quite possibly due more to "automation" than reality.  It appears that many of the larger investment houses are using software that tracks short term vs. long term interest rates, and their programs predicted a "yield curve inversion", which usually signals a looming recession...and set in a series of automated selling.  It almost seems that this is a case of Artificial Intelligence taking priority over common sense.  The next few days should be interesting.


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## Aunt Bea (Dec 5, 2018)

*Jesse Livermore Quote 6:*
“The market does not beat them. They beat themselves, because though they have brains they cannot sit tight.”

*Jesse Livermore Quote 8:*
“I can’t sleep” answered the nervous one.
“Why not?” asked the friend.
“I am carrying so much cotton that I can’t sleep thinking about. It is wearing me out. What can I do?”
*“Sell down to the sleeping point”,* answered the friend.

http://www.asxmarketwatch.com/2011/...rom-jesse-livermore-on-trading-and-investing/


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## mathjak107 (Dec 5, 2018)

Don M. said:


> Today's market performance was quite possibly due more to "automation" than reality.  It appears that many of the larger investment houses are using software that tracks short term vs. long term interest rates, and their programs predicted a "yield curve inversion", which usually signals a looming recession...and set in a series of automated selling.  It almost seems that this is a case of Artificial Intelligence taking priority over common sense.  The next few days should be interesting.




most modern recessions were caused by high oil prices . the high oil prices forced the feds hand to raise rates to keep a lid on inflation . a by product was usually an inverted yield curve ...

well today oil is falling and the fed is not  forced to keep raising short term rates .  you had  gdp fall from 5.40% the beginning of the year to 2.60 today .

in short this is not the typical inverted yield curve . there is nothing so far that has the building blocks in place for a recession  but the traders don't differentiate.


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## Butterfly (Dec 5, 2018)

Well, I plan to just grit my teeth and ride this one out as I did the last one.


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## Aunt Bea (Dec 6, 2018)

Butterfly said:


> Well, I plan to just grit my teeth and ride this one out as I did the last one.



Me too!

I haven't felt the need to make a trade since 2012.

If we do take a big dip I'll probably do a little shopping, nothing like a good sale!


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## mathjak107 (Dec 6, 2018)

well we call things sales but stocks  have no memory  of what they once were . we like to think that because we buy something cheaper that the market is discounting it wrong but the reality is at any given point that is all the markets see it is worth .

it took us  13 years to recover adjusted for inflation in 2000 .  . nothing was on sale , it was only worth what it was worth for many years .

i just call it rebalancing . that is when an allocation gets either lower or higher then you want it to be . so you adjust .  since i am usually about 50% equities and now i am in the lower 40% range i will rebalance buying more stock. but not because i think it is some sale .


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## Aunt Bea (Dec 6, 2018)

mathjak107 said:


> well we call things sales but stocks have no memory of what they once were . we like to think that because we buy something cheaper that the market is discounting it wrong but the reality is at any given point that is all the markets see it is worth .
> 
> it took 200 13 years to recover adjusted for inflation . nothing was on sale , it was only worth what it was worth for many years .
> 
> i just call it rebalancing . that is when an allocation gets either lower or higher then you want it to be . so you adjust . since i am usually about 50% equities and now i am in the lower 40% range i will rebalance buying more stock. but not because i think it is some sale .



Apparently, I've been doing it wrong for 45 years but I have no complaints about my financial situation.

I guess we each need to follow our own path.


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## mathjak107 (Dec 6, 2018)

i am not saying anyone is doing things wrong .  i have been an investor for more than 35 years too . but we sometimes have a skewed way of looking at things .

markets never have a memory . ge was on sale at one time , gm was on sale , the failed stock graveyard is filled with those so called  stocks we thought were " on sale " .

heck , people thought stocks were "on sale " in 2008 when we fell 2000 points . who know we had 4000 more to go ...

so deciding what is a "sale " is not judged by the fact prices are lower- UNLESS YOU ARE A DIRTY LIL MARKET TIMER .

 .  the money we make is just  sticking to the plan  , not thinking we are timing something .

money is made by time in the markets for most of us , NOT TIMING THE MARKETS .    when you think it is a sale you are  trying to time the markets . 

so what do we do ????????????

when you rebalance according to plan or you add money according to plan and not based on what you consider a sale point or what is going to happen tomorrow  , you are not attempting to identify what is on sale  or time things , that rarely works and that is timing .  you are just following the mechanics of your plan without trying to guess at the timing .

if you rebalance once a year , your doing it regardless of timing things , if you contribute money all year , you are doing it without trying to time things . 

so we don't know if this is a sale or a start of 20 years of flat markets like we had in the 1960's  or the 13 years in 2000 . but if our mechanics of our plan say add equities , well that is not market timing .

see the difference ?


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## Aunt Bea (Dec 6, 2018)

mathjak107 said:


> i am not saying anyone is doing things wrong . i have been an investor for more than 35 years too . but we sometimes have a skewed way of looking at things .
> 
> markets never have a memory . ge was on sale at one time , gm was on sale , the failed stock graveyard is filled with those so called " on sale " .
> 
> ...



I understand what you are saying about being a good stock picker/analyst.

But I also believe that when you rebalance you are also buying stocks/bonds on sale or buying the market at a discount.

I'll keep plodding along until my simpleminded way of doing things stops working for me.


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## mathjak107 (Dec 6, 2018)

Aunt Bea said:


> I understand what you are saying about being a good stock picker/analyst.
> 
> But I also believe that when you rebalance you are also buying stocks/bonds on sale or buying the market at a discount.
> 
> I'll keep plodding along until my simpleminded way of doing things stops working for me.



well lets not call it a sale . if markets are down and by the mechanics of what we do it is time to add money because you are rebalancing  by date  , then great if you picked up some shares cheaper then you had .  but once you get in to doing this  not by the mechanics of our plan but trying to time the buy , well now we are reverting to market timing and that rarely goes well  nor are our guess of what a sale is are usually correct ..

why ? you need cash to buy when markets are down . that means you may have lost lots of upside in that cash  that you were holding just as easily . so just following our strategy and plan works best  over time . not trying to decide if markets are high , low or fairly valued .

also markets are up 2/3's of the time and down only 1/3 . so even dollar cost averaging in rarely works well because the lower prices are just not enough to amount to much compared to the higher priced shares we have .



i know people like to call stocks when they are down a sale , but that is how they end up panicking or losing money like when 2008  low ended up being 4000 points lower then we thought low was .


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## mathjak107 (Dec 6, 2018)

one thing i want to add is we all hear the mantra buy low and sell high . no other mantra has lost more money for investors than trying to follow that silly rule and TIME THINGS  .

like i said we thought down 2000 points was low in 2008 . so you had those scrambling to get in  , and then we headed down another 4000 points . trillions were lost as many  hit stop losses , or got scared and panicked  and sold out when markets went the other way .

an object in motion stays in motion -until it hits something -so odds are pretty good trying to catch that falling knife has the next stop lower and lower .

so what has made more money for investors  then any other mantra ?

buy high -sell higher .

the trend is your friend and a market going up tends to stay going up until it hits something .

odds are after you buy , you are headed up , not down .  you would have to be that unlucky guy at the end of the line the day markets hit something and reversed .

this is a concept few actually realize .  more money is made by buying high and selling higher then most ever make trying to buy low and selling higher  just because fighting the trend can be so hard and painful  mentally .

think about the fact that if someone is going to time those buys , they need to get out of equities or some equities when things are still up .. that usually takes a nervous nellie type .

to buy back in when markets are plunging with no bottom in site takes balls of steel .

rarely does one person possess both qualities .


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## mathjak107 (Dec 7, 2018)

i thought this pretty interesting ,  it shows how going through all the gyrations to try to duck the down draft will likely just shoot you in the foot or have you miss the biggest most influential gain days because they happen very early on , long before you see anything changed .

University of Michigan Professor H. Nejat Seyhun analyzed 7,802 trading days for the 31 years from 1963 to 1993 and concluded that just 90 days generated 95% of all the years’ market gains — an average of just three days per year .

 https://www.ifa.com/12steps/step4/missing_the_best_and_worst_days/


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## Knight (Dec 7, 2018)

What are investing goals? Is buying and selling for capital gain the objective or long term dividend reinvesting the goal. There is the very real tolerance for risk,  not investing and buying safe works for many. It comes down to different strokes for different folks. No matter the goal open discussion can help.


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## mathjak107 (Dec 7, 2018)

bottom line to it all is total return . how the money gets distributed out to us is irrelevant .   we need enough appreciation so that we can keep selling some shares in our portfolio to keep the income stream going . if it is coming from dividends we need the same appreciation to offset  the set back with every dividend.  

i have a mix of both . some funds spin off dividends and gain distributions while others just have gain distributions .

tax wise i prefer my income from appreciation since unlike the dividend which is taxed on 100% the  non dividend payer is only taxed on the gain portion .

but it really does not not matter because to generate the same income you need the same total return either way


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## KingsX (Dec 20, 2018)

.

As I posted here months ago,  the stock market is a risky game of chance. 

I'm retired and can't afford to play risky games with my money.  So, all my investment money is in bank CDs.  Slow but steady and dependable increases. And since I have no debt and want no debt... interest rates going up to historic norms benefits me.

.


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## mathjak107 (Dec 20, 2018)

down turns are always part of your gain cycle and always will be . 

no money should ever be in equities you need the shorter term . it should only be the long term money for use many years out .  

a 50/50 mix can go more than a decade without selling any equities to raise cash .

a 50/50 mix has never , did i say never , lost money over any 10 or  20  year period .  that is no game of chance.   odds are pretty good an investor will be very happy with their balance , downturns included as always .


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## Aunt Bea (Dec 20, 2018)

mathjak107 said:


> down turns are always part of your gin cycle and always will be .
> 
> *no money should ever be in equities you need the shorter **term .** it should only be the **long term** money in **decades .*
> 
> ...



I agree that's why I always keep a little cash on hand to smooth out the bumps in the market.

*“When the well is dry, we know the worth of water.” - Benjamin Franklin

*


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## mathjak107 (Dec 20, 2018)

it is not just about cash , it is also about laddering bonds or bond funds to meet your needs .  50% of our portfolio is assorted duration bond funds that run from ultra short to 7 or 8 years out .


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## Aunt Bea (Dec 20, 2018)

mathjak107 said:


> it is not just about cash , it is also about laddering bonds or bond funds to meet your needs . 50% of our portfolio is assorted duration bond funds that run from ultra short to 7 or 8 years out .



I understand the concept and I use balanced funds, bond funds, etc... although I don't hold any individual bonds.

I just don't understand the aversion to cash/liquidity in turbulent markets.

IMO you need to keep an eye on the accelerator and an eye on the gas gauge in order to get where you are going.  For me, cash is the gas that keeps me going and I don't ever want to end up sitting on the side of the road with an empty tank.

We each need to find a way that works best for our own situation/circumstances.


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## mathjak107 (Dec 21, 2018)

Aunt Bea said:


> I understand the concept and I use balanced funds, bond funds, etc... although I don't hold any individual bonds.
> 
> I just don't understand the aversion to cash/liquidity in turbulent markets.
> 
> ...



you should just have an allocation that works and stay with it . trying to tme things to move to cash is a losing game

markets turn on a dime ... the biggest gains in a recovery happen when everyone thinks it is a suckers rally .. there are no signs anything changed .

so what typically ends up happening trying to avoid simply riding the cycle ends up hurting you even more . the most successful way to deal with down turns is just rebalance , buying equities  not running away from them trying to hide in cash .  
University of Michigan Professor H. Nejat Seyhun analyzed 7,802 trading days for the 31 years from 1963 to 1993 and concluded that just 90 days generated 95% of all the years’ market gains — an average of just three days per year.


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## Aunt Bea (Dec 21, 2018)

mathjak107 said:


> *you should just have an allocation that works and **stay** with **it .* trying to tme things to move to cash is a losing game
> 
> markets turn on a dime ... the biggest gains in a recovery happen when everyone thinks it is a suckers rally .. there are no signs anything changed .
> 
> ...



I agree and I do, I stick with a middle of the road 50/50 - 60/40 mix of bonds and stocks mainly in the form of mutual funds but I also maintain a cash reserve/cushion.

I understand that keeping a cash cushion has a real cost but I'm willing to bear that cost for my own peace of mind.

At this point in my life, I'm not worried about maximizing my returns my only concerns are my personal comfort and not becoming a financial burden to anyone on my way to the cemetery.


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## mathjak107 (Dec 21, 2018)

i keep about 6% cash which dwindles down through the year to about 2% then gets refilled on jan2 .

since it is my ultra short term bond funds that stood up the best followed by some floating rate bond funds they will create next years cash and also i have to buy about 150k in equities to get them back to 50% .

so i don't find we need cash as cash , but we do need money laddered to meet our needs . you can do that with bond funds and bonds by matching a funds duration to your needs


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