# Are Pos. Or Neg. On The Stock Market for The Next Three Years?



## fmdog44 (Feb 21, 2018)

Up for like 9 straight years and we just had the 10% correction so my question is if you were putting money in stocks are you hedging on getting out or still a buyer?


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## Lara (Feb 21, 2018)

I'm in for the long term...although it's getting shorter and shorter these days . We're to expect volatility in the stock market now so it will be a bit bumpy but historically it will go up in the long run. Once it's way up again, then I might change from "medium risk" to "low risk". It's getting to be that time in life for some when we don't have as much time to wait for a market recovery. Some are blaming this latest drop on the poor seasonal sales of Walmart. Walmart said it was a glitch in their delivery but that has been fixed now. So we'll see if it heads back up now. It's hard to imagine that Walmart's sales are that influential but apparently so.


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

A great deal of our income is from dividend-paying stocks, so we'll be riding it out.


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## fmdog44 (Feb 21, 2018)

Lara said:


> I'm in for the long term...although it's getting shorter and shorter these days . We're to expect volatility in the stock market now so it will be a bit bumpy but historically it will go up in the long run. Once it's way up again, then I might change from "medium risk" to "low risk". It's getting to be that time in life for some when we don't have as much time to wait for a market recovery. Some are blaming this latest drop on the poor seasonal sales of Walmart. Walmart said it was a glitch in their delivery but that has been fixed now. So we'll see if it heads back up now. It's hard to imagine that Walmart's sales are that influential but apparently so.



You make sense. My only concern when a recession does hit how kind or unkind it will be. Having gone through the "Dips" of the past since 1985 I'm not in agreement with some pros that say 60-40 0r 50-50 stocks and bonds. Even low risk at say my age (70) is still risk. I own a lot of CDs and the returns on them is miniscule. I'm not a penny pincher but I think having gone through the plunges of the past this positive run is a little too long for my sleep at night . Anyhow, it's all guesswork!!


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## fmdog44 (Feb 21, 2018)

C'est Moi said:


> A great deal of our income is from dividend-paying stocks, so we'll be riding it out.



I have a big stake in a dividend mutual fund and a handful of dividend paying ticks in a separate account. But again, time is critical and dividends are fading in some companies. Hopefully, others will not follow suit.


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## mathjak107 (Feb 22, 2018)

returns will likely be more subdued after the big run up but things are still very positive looking . 

don't fall in to a false sense of confidence because you are getting a dividend . a dividend is no different than you selling equal dollars from your portfolio . down is just as down and it is only total return that counts.

dividends are not like interest and go on top of principal; . dividends are a sale of a piece of your share value which they hand back to you . there is a big difference between interest and dividends in that respect .

have 100k invested in a bank and 5% interest leaves you with 105k .

100k in a dividend stock that pays out 5% leaves you with 5k in hand and 95k left compounding  by the markets at the ring of the bell. if you reinvest the dividend you merely have your 100k back you had before the payout .

exchanges always have to reduce the value of your investment by the amount of the payout .

so don't think being down does not matter if you are getting a dividend , it sure does .


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## rkunsaw (Feb 22, 2018)

fmdog44 said:


> I have a big stake in a dividend mutual fund and a handful of dividend paying ticks in a separate account. But again, time is critical and dividends are fading in some companies. Hopefully, others will not follow suit.



C'est Moi and fmdog44, I also have dividend stocks and a dividend mutual fund. 

I have learned a lot from mathjak107 posts but he is wrong about dividends. Dividends are a cash amount that shareholders receive per 

each share owned. They don't affect the price of the stock.


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## mathjak107 (Feb 22, 2018)

100% incorrect .

finra rules mandate the investment is reduced in value by the same amount paid . if you have 100k invested  the night before  ex div  and the div is 5% , then you have only 95k compounding at the open  and 5k in pocket .


if you reinvest you have the markets working on the same 100k you had the night before , so see now you can learn even more .

you certainly can never pull millions out of a company and not have it effect what the next buyer will pay  after a dividend , it would make no sense .

exchange rules mandate a set back automatically .



FINRA MANUAL :

5330. Adjustment of Orders

(a) A member holding an open order from a customer or another broker-dealer shall, prior to executing or permitting the order to be executed, reduce, increase, or adjust the price and/or number of shares of such order by an amount equal to the dividend, payment, or distribution on the day that the security is quoted ex-dividend, ex-rights, ex-distribution, or ex-interest, except where a cash dividend or distribution is less than one cent ($0.01)



 so now you  learned something .  they reduce the share price so now market action is  on the balance less the dividend going forward .

the dividend is only them giving you back a piece of your share price . there is no magic here where all of a sudden you have 5% more in value . that is 100% incorrect if that is what you think .


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## C'est Moi (Feb 22, 2018)

mathjak107 said:


> returns will likely be more subdued after the big run up but things are still very positive looking .
> 
> don't fall in to a false sense of confidence because you are getting a dividend . a dividend is no different than you selling equal dollars from your portfolio . down is just as down and it is only total return that counts.
> 
> ...



Down only matters if you are SELLING, which I am not.   I don't need your lectures; my investments are doing fine.


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## C'est Moi (Feb 22, 2018)

rkunsaw said:


> C'est Moi and fmdog44, I also have dividend stocks and a dividend mutual fund.
> 
> I have learned a lot from mathjak107 posts but he is wrong about dividends. Dividends are a cash amount that shareholders receive per
> 
> each share owned. They don't affect the price of the stock.



Thanks; I am familiar with stocks and investing.   I don't look to internet "experts" for my information.


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## mathjak107 (Feb 22, 2018)

your investments may be doing fine but that logic is nonsense .

so you are trying to  tell us if someone closes out their position each night and re buy's  the same investment in the morning that  counts but keeping the same money in play over night even in the same investment is somehow different ?  nonsense .

your net worth is what it is at any point in time whether you sell or not . you may not care what your investment is worth at that point in time but that is what it is worth if you sell or not .

in fact retirement income is based on portfolio value , not whether you sell .

estate taxes are based on portfolio value not whether you sell 

your net worth is based on portfolio value not whether you sell .

asset based mortgages are based  on portfolio value whether you sell or not .

confusing the fact that you may not care what your value is has no bearing on whether that is what your investment is worth whether sold or not .

   it may vary over time but that is irrelevant . it is your invested dollars at any point  and that stock may never bounce back .. realizing a gain  or loss only means you now have a tax obligation if in a taxable account otherwise it  does not change your value invested ..

personally i don't care what you believe but others here should understand things correctly as it can lead to poor decisions if  one does not understand things .


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## mathjak107 (Feb 22, 2018)

C'est Moi said:


> Down only matters if you are SELLING, which I am not.   I don't need your lectures; my investments are doing fine.


so i guess if the company goes bankrupt and you held it , it does not count .


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## mathjak107 (Feb 22, 2018)

so many people have this misconception about down does not count if you don't sell .

that is just poor logic .

it always counts because that is what you have. you may choose to keep the money in play and cycle with the markets and hope things recover and even go higher . but that does not mean that your value is not what it is at any point in time .


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## C'est Moi (Feb 22, 2018)

Here's a good quote...   "If I want your opinion, I'll ask for it."   You do it your way; my way works for me.


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## mathjak107 (Feb 22, 2018)

like i said you can do whatever you like, but not everyone here is an investor and as you see there is a lot of mis information and myth circulating . it is important that what is said  that others read be correct and factual and make good investing sense . this forum is where people come to learn .

thinking because you don't sell you are not down  or thinking there is no adjustment to investment value when dividends are paid is wrong information and others should understand that . they can make poor decisions and bad choices because of mis-information .


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## rkunsaw (Feb 22, 2018)

mathjak107 said:


> so i guess if the company goes bankrupt and you held it , it does not count .



If the company goes bankrupt you just picked the wrong company to invest in. That has nothing to do with dividends. Many high risk companies offer high dividends to lure investors.  Smart investors stay away from these unless they have plenty of extra money to play with.


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## mathjak107 (Feb 22, 2018)

of course it has nothing to do with the dividend . but it has a whole lot to do with saying being down does not count if you don't sell . general motors was as blue chip as you could get .  but  it ended up circling the drain . so you need to pay attention to what stocks are worth and not think every thing comes back because it is not true .

the problem is everything tanks in a down turn so you do not know if your stock is just cycling with the markets or if it will turn out it has problems .

when you own stocks especially individual companies you never take your eye off the ball and when you are down you are down . we just hope we cycle back and recover but that has nothing to do with your investment value at any moment.

one other mis-belief . reinvesting dividends in a down turn is a none event . you do not pick up any extra value because the dividend price reduction and the reinvestment are pretty close or at the same prices . there is a lot of myth there too .

everything in investing is  based on you have x-amount of dollars invested at the ring of the bell . markets take it up our down a certain percentage .  so if you have a  100k in a stock and it went up 5%  you have 105k . if it pays a dividend of 5%  you get 5k in pocket and the exchange computers set you back to 100k invested . if you reinvest you go back to the same 105k .

when the bell rings that 100k if you did not reinvest or the 105k is what gets compounded on going forward . the div is not giving you anything you did not have before ., it never does .

it just gives you back some of your own money  that you had in the share price and lets you choose whether to reinvest it or keep some of it but it is money you already had  the night before the ex div


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## C'est Moi (Feb 22, 2018)

mathjak107 said:


> like i said you can do whatever you like, but not everyone here is an investor and as you see there is a lot of mis information and myth circulating . it is important that what is said  that others read be correct and factual and make good investing sense . this forum is where people come to learn .
> 
> thinking because you don't sell you are not down  or thinking there is no adjustment to investment value when dividends are paid is wrong information and others should understand that . they can make poor decisions and bad choices because of mis-information .



This will be my final post to you.   *I neither want nor NEED your "advice."*   I responded to the original post question as to what I am doing with stocks.   The End.


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## mathjak107 (Feb 22, 2018)

my thread is not advice to you nor is it a reply to you   , i already said you can do as you please .. there is no need to reply at all to  my posting  . it is there for others to learn from as general  knowledge


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## Lon (Feb 22, 2018)

I am positive. Despite my age I am and will stay invested.


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## Lethe200 (Feb 22, 2018)

Getting back to the original question:

The crystal ball is cloudy for the short-term (as always; the darn thing just won't cooperate, LOL) but long-term I'd say the massive increase in the deficit is not a good sign. With the economy running at very low unemployment and corporations in flush cash positions on their balance sheets, such a massive stimulus has never been attempted before. 

Nobody, and I mean nobody, has anything but educated guesses as to what will happen in the next 5-10 years. One noted economist said simply, "This is an unprecedented experiment in economics. No one can tell what's going to happen."

Right now the biggest gains are coming from overseas markets. You may have noticed the dollar has been retreating from its all-time highs for a while now, trending downwards.

We take a modest distribution from our portfolio. I just put in my application for SocSec so we may reduce that distribution amount since it's just "mad money" for us. Half is in a taxable account with a risk profile of "balanced/moderate aggressive". Half is in an IRA with a "balanced/low aggressive" profile.

Our CFP firm uses 5 profiles: risk-averse, balanced/low aggressive, balanced, balanced/moderate aggressive, and aggressive. Clients are always free to change anything they wish.

Since we're retired we aren't putting new $$$ into the accounts, but if we were still working we would certainly continue to add to the accounts. It would get spread out according to the fund mix of each account.

I think the problem with "getting out" is that inflation is kicking up. Holding cash is like throwing it into the wind. But it makes some people feel better - I know several people who sold at the last market "low point" in March 2009 and never did get back into the market. They are still too scared.

Investing is a risk. Nothing guaranteed, and that's not easy for many to accept. We're fortunate with several "strings to our bow" so have minimized risks as much as we can while keeping our money working for us. Beyond that, we just have to take whatever comes.


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## fmdog44 (Feb 22, 2018)

mathjak107 said:


> so many people have this misconception about down does not count if you don't sell .
> 
> that is just poor logic .
> 
> it always counts because that is what you have. you may choose to keep the money in play and cycle with the markets and hope things recover and even go higher . but that does not mean that your value is not what it is at any point in time .



Well said. People say, "That's OK the market will come back miss the point that last week you had $10,000 and toady you have $9,000.


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## fmdog44 (Feb 22, 2018)

Lethe200 said:


> Getting back to the original question:
> 
> The crystal ball is cloudy for the short-term (as always; the darn thing just won't cooperate, LOL) but long-term I'd say the massive increase in the deficit is not a good sign. With the economy running at very low unemployment and corporations in flush cash positions on their balance sheets, such a massive stimulus has never been attempted before.
> 
> ...



I agree with your post but also if and only if you have enough cash and your comfort level demands you have a portion in cash it is not disastrous to have a CD at 2% if inflation is also at 2% or even a little higher. As long as one understands losing a little money each year is OK as long as they are satisfied with the security that comes with it. I have many CDs in part due to my money chest is large enough to survive until I turn out the light (or someone does it for me).


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## mathjak107 (Feb 23, 2018)

Lethe200 said:


> Getting back to the original question:
> 
> The crystal ball is cloudy for the short-term (as always; the darn thing just won't cooperate, LOL) but long-term I'd say the massive increase in the deficit is not a good sign. With the economy running at very low unemployment and corporations in flush cash positions on their balance sheets, such a massive stimulus has never been attempted before.
> 
> ...




on the surface it looks like inflation is heating up and that is spooking the bond market which in turn is spooking stocks .

but once you look under the hood  you will find that while gdp is growing and expected to hit 2.50% THAT IS THE BEST NUMBER WE COULD REACH WITH TRILLIONS ALREADY PUMPED IN TO THE ECONOMY  .  wow  that sucks .

but while that gdp number is not so great once you subtract the savings rate which has fallen off a cliff and credit card debt which is very high  it leaves little to purchase new  goods and services . once you adjust for that gdp looks more like 1.25% than 2.50% . so my opinion is inflation worries are way over done and rates  are to high for potential gdp right now.

i think bonds will be the better choice once the markets focus on these other aspects . i think rates will come down again as 1.25% gdp is pretty close to sliding in to recession .


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## OneEyedDiva (Feb 25, 2018)

I only own very small amounts of private stocks: Facebook, Apple & Fitbit. Fitbit is a dog but I'm holding on to it anyway. Even with the correction, FB & Apple are doing well. The rest of my portfolio is in mutual funds and ETFs. Those did well in the correction also. I buy when the market dips. It's easier to tell when with ETFs because of realtime reporting. With mutual funds I have to try to guess if the downturn of the benchmark index will affect the particular fund I'm looking to buy more shares of. Sometimes the share price goes up even though the index went down. Since I would only need to take money out of my investments if there is a catastrophic event or if I have to go into a nursing home, I intend to stay invested even when another crash occurs.


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## mathjak107 (Feb 26, 2018)

the funny thing is while we all like buying dips the reality is trying to buy low and sell high has lost more money for investors than any other mantra .

for one thing to buy the dips means you have to have un-invested cash sitting around . as peter lynch said more money has been lost or given up in anticipation of or in preparation for a down turn then  has been lost in any downturn .

since markets are up 2/3's of the time and down only about 1/3 you rarely make enough in a dip unless you are a great timer then you gave up  by not being invested with that money on the sideline .

the biggest problem is no one knows what is low .we all thought low in 2008 was when the markets fell 2000 points . well who knew we had 4000 more to go .

so many were  either stopped out when limits were hit or they just plain panicked and bailed or realized they did not get a deal at all and threw in the towel.

so what has made the most money ?

buy high and sell higher ,  the trend is your friend .

in a dip odds are after you buy next stop is lower as objects in motion stay in motion . when going up , next stop is usually higher and you have to be pretty unlucky to lose money and be that person at the end of the line before a reversal .

so the point is i don't usually keep uninvested cash waiting for that proverbial dip as rarely do i make back what i gave up  keeping that cash .

if you get to buy a dip when rebalancing , well that is a good thing . but rebalancing  or dollar cost averaging  have their own performance hurting issues as well.

about the best situation is you suddenly get some cash from something and at that moment buy in to a dip with money you never had prior sitting around .


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## KingsX (Feb 27, 2018)

.

Thank God,  I was able to retire early [age 55] debt-free and a nice nest egg without investing in the stock market.

Once I did put $2000 in a mutual fund which immediately lost  one-fourth of my money during a boom time 
when most everyone else was making money in stocks. That was my wake up call to go a safer route.

Ironically,  I retired in 2007. I was so blessed to have zero money in the crashing 2008 stock market.


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## mathjak107 (Feb 27, 2018)

well it was only unlucky if you did the wrong thing and  bailed . today if we did not tell the story we would never know it happened from where the funds grew to .

in fact kitces looked at  the retiree who retired in to the crash in 2008. today they are just another average retiree group 10 years in .

markets are volatile over the long term but diversified funds have little risk .  in fact 50/50 has never lost money in any 10 or 20 year time frame ever .


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## KingsX (Feb 27, 2018)

mathjak107 said:


> in fact kitces looked at  the retiree who retired in to the crash in 2008. today they are just another average retiree group 10 years in .
> 
> markets are volatile over the long term but diversified funds have little risk .  in fact 50/50 has never lost money in any 10 or 20 year time frame ever




Considering most people retire in their 60s [and many of them because of health issues]...
I wonder how many of them would die before that 10 or 20 year time frame.


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## mathjak107 (Feb 27, 2018)

it wouldn't matter . a retirement portfolio is structured by when the money is needed .   even at 65  you need money for you and your spouse to eat in 20 to 30 years if you do make it out that far . that is  still long term money ..

i have about 10 years of draw in an income model  which is 75% bond funds and 25% a dividend equity fund .  that is 75% less volatile than the s&p 500 . that is used to eat near term . all the rest is in a 60/40 growth and income model . there is lots of money in  bonds if needed.

in a down stock market it would not be stocks that got sold , you rebalance and it would be bonds that would create cash . in a downturn there is a pretty good chance you will be rebalancing stocks by buying them .

i don't know why people think you throw all the money in to equities ,  that makes no sense . neither does ,  it is stocks that get sold in a down market . if stocks fell you are rebalancing by selling bonds not stocks .


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## oldman (Feb 27, 2018)

I still enjoy being an active trader. No options, bonds or margin trading, just equities. I will do some short trading from time to time, but mostly, when I buy a stock, I will go long with it. 

Earlier last year, I got burned pretty bad when I shorted GE, but you can win them all.


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## KingsX (Feb 27, 2018)

mathjak107 said:


> in a down stock market it would not be stocks that got sold , you rebalance and it would be bonds that would create cash . in a downturn there is a pretty good chance you will be rebalancing stocks by buying them .
> 
> .




Not if one dies in a down market.

.


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## Don M. (Feb 27, 2018)

The last few weeks/months have been a boon for investors, even with the February downturn.  But, I am becoming increasingly pessimistic about the outlook for coming months.  Our government is playing Russian Roulette by reducing taxes, without plans for reducing spending.  Just today, the Fed is talking about multiple rate hikes later this year, and dumping another trillion dollars of already shaky bonds into the market.  Even with inflation at low levels, and employment holding fairly firm, it won't take much to spook investors if the Washington "smoke and mirrors" begins to unravel.  Increasingly, there is little to support the dollar, other than Washington "promises".  While many of the "experts" have been predicting that this Bull Market has plenty of room to run, I'm seeing more and more sentiment urging caution.  I'm almost ready to take the gains, and dump most of my holdings into the money market, and perhaps even some precious metals, and prepare to ride out what is starting to look like a repeat of 2007.

Others Thoughts?????


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## mathjak107 (Feb 28, 2018)

KingsX said:


> Not if one dies in a down market.
> 
> .



dead is dead game over . not sure of your point .

even if heirs inherit it they have their life time to invest at those same levels and let it ride .  sorry but i fail to see any  point there


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## mathjak107 (Feb 28, 2018)

Don M. said:


> The last few weeks/months have been a boon for investors, even with the February downturn.  But, I am becoming increasingly pessimistic about the outlook for coming months.  Our government is playing Russian Roulette by reducing taxes, without plans for reducing spending.  Just today, the Fed is talking about multiple rate hikes later this year, and dumping another trillion dollars of already shaky bonds into the market.  Even with inflation at low levels, and employment holding fairly firm, it won't take much to spook investors if the Washington "smoke and mirrors" begins to unravel.  Increasingly, there is little to support the dollar, other than Washington "promises".  While many of the "experts" have been predicting that this Bull Market has plenty of room to run, I'm seeing more and more sentiment urging caution.  I'm almost ready to take the gains, and dump most of my holdings into the money market, and perhaps even some precious metals, and prepare to ride out what is starting to look like a repeat of 2007.
> 
> Others Thoughts?????



all i know is the cycles have always been part of the deal and have grown plenty of money .  stocks have always been a longer term investment . it makes no sense as a long term investor to  worry about temporary short term dips .

or try to mitigate them . odds are you will just end up reducing your long term gains  trying to mitigate these short term issues


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## Aunt Bea (Feb 28, 2018)

Don M. said:


> The last few weeks/months have been a boon for investors, even with the February downturn.  But, I am becoming increasingly pessimistic about the outlook for coming months.  Our government is playing Russian Roulette by reducing taxes, without plans for reducing spending.  Just today, the Fed is talking about multiple rate hikes later this year, and dumping another trillion dollars of already shaky bonds into the market.  Even with inflation at low levels, and employment holding fairly firm, it won't take much to spook investors if the Washington "smoke and mirrors" begins to unravel.  Increasingly, there is little to support the dollar, other than Washington "promises".  While many of the "experts" have been predicting that this Bull Market has plenty of room to run, I'm seeing more and more sentiment urging caution.  I'm almost ready to take the gains, and dump most of my holdings into the money market, and perhaps even some precious metals, and prepare to ride out what is starting to look like a repeat of 2007.
> 
> Others Thoughts?????



For me the answer is somewhere between these two quotes from Jesse Livermore.
_
“If you can’t sleep at night because of your stock market position, then  you have gone too far. If this is the case, then sell your position  down to the sleeping level.”_ - Jesse Livermore

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


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## mathjak107 (Feb 28, 2018)

the problem for many is any allocation is to much for them .  those  who have allocations  that are lower in equities are usually gun shy  to begin with . they just end up having lower trigger points . to the human brain it hates losing money more than making money so usually in gun shy people any loss sets them worrying . studies show that balanced funds show no better investor behavior  than growth funds do .

to date no investors ever lost money , or in fact did not make decent money from diversified funds ever in our history  over the longer term . but lots was lost because of bad investor behavior . then those people blame markets of course for their actions .

riding the natural market cycles over the long term is volatile but it has been anything but risky  unless you try to beat the markets at it's own game by thinking you will outsmart things . then you are really speculating not investing .

more retirements have ended up in the failed retirement graveyard  from being to conservative than from markets . even if you had the nerve to use  100% equities in retirement   and spent down in good or bad times from it you would have done only marginally worse than 50/50 did . i think out of the 117 rolling 30 year periods you failed 1 extra period . even 100% equities would have survived 93% of all the time frames to date just fine .

the biggest failures and lowest success rates came from avoiding equities as at a 4% draw rate inflation adjusted fixed income only survived 46% of the periods so far without taking a pay cut .


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## Aunt Bea (Feb 28, 2018)

I've read the statistics and I don't disagree but sometimes it's not about making or losing money, it's about having enough cash to pay the bills.  

_“We were  always focused on our profit and loss statement. But cash flow was not a  regularly discussed topic. It was as if we were driving along, watching  only the speedometer, when in fact we were running out of gas.”_— Michael Dell


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## mathjak107 (Feb 28, 2018)

it is all about having enough to pay bills but this fixation on you need loads of cash to do that or you even need cash to do that is flawed . rebalancing a standard 50/50 , 60/40 etc provides all the needed money most would need for the year and in fact this has been  the traditional way of doing it since the beginning of when people retired and needed to create their own incomes ..

there is nothing magical about cash that cannot be done through just rebalancing a portfolio and that is something many do not understand . we create each years cash on jan 1 for spending . everything else we need for the next 10 years is in an income portfolio with about 25% in a dividend equity fund .  no more cash than that 1 year is really needed and if it was i could rebalance the income model and  free up more .

being to cash heavy hurts folks more than helps and the less you have the more important it is to get this balance right . there is little reason to hold low yielding cash when a ultra conservative income model can do so much better .


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## mathjak107 (Feb 28, 2018)

as top researcher michael kitces said :

_Cash reserve strategies that hold aside several years of spending to avoid liquidations during bear markets are a popular way to manage withdrawals for retirees. In theory, the strategy is presumed to enhance risk-adjusted returns by allowing retirees to spend down their cash during market declines and then replenish it after the recovery. Yet recent research in the Journal of Financial Planning reveals that the strategy actually results in more harm than good; while in some scenarios the cash reserves effectively allow the retiree to “time” the market by avoiding an untimely liquidation, more often the retiree simply ends out with less money due to the ongoing return drag of a significant portfolio position in cash. As a result, the superior strategy for those who want to alter their asset allocation through market volatility (the effective result of spending down cash in declines and replenishing it later) appears to be simply tactically altering asset allocation directly, without the adverse impact of a cash return drag. Nonetheless, this still fails to account for the psychological benefits the client enjoys by having a clearly identifiable cash reserve to manage spending through volatility – even though the reality is that it results in less retirement income, not more. 
_


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## Aunt Bea (Feb 28, 2018)

I hope that your fixation with being fully invested serves you as well as my fixation with maintaining a cash reserve serves me.

The difference between us may be that I invest mainly in balanced funds and do not normally invest in stock funds or bond funds so the rebalancing is done for me and not by me.

So anyway, do you think the rain will hurt the rhubarb.


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## mathjak107 (Feb 28, 2018)

Aunt Bea said:


> I hope that your fixation with being fully invested serves you as well as my fixation with maintaining a cash reserve serves me.
> 
> The difference between us may be that I invest mainly in balanced funds and do not normally invest in stock funds or bond funds so the rebalancing is done for me and not by me.
> 
> So anyway, do you think the rain will hurt the rhubarb.


not sure where you would get i am fully invested in retirement from . i range from 40-60 to 50/50 as a max . i have not been 100% equities since before i was ready to retire.

hordes of cash is not a good idea for the most part


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## Aunt Bea (Feb 28, 2018)

mathjak107 said:


> not sure where you would get i am fully invested in retirement from . i range from 40-60 to 50/50 as a max . i have not been 100% equities since before i was ready to retire.
> 
> hordes of cash is not a good idea for the most part



Again our understandings differ, if I used the term fully invested incorrectly then I apologize.

*fully invested* - Investment & Finance Definition. A condition in a portfolio in which only a minimum amount of cash is being held and virtually all funds are invested in stocks, bonds, or other investments.


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## mathjak107 (Feb 28, 2018)

bonds  have always worked better than holding cash over longer periods . if you look at the  TOTAL returns on bonds since 2008 as an example vs cash , you grew way way more money with bonds . now that the cycle is changing you will likely have about 2x  as much  even if bonds dip,  then  what you would have accumulated  using cash ,using an assortment of bonds funds instead of cash over the years .

even with rates rising  the difference in rates will likely still beat cash . there were lots of studies done on using cash buffers and all showed the same lack of benefit compared to simply rebalancing equites and bonds


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## Bullie76 (Feb 28, 2018)

It's hard to be positive on the stock market short term. And I would say 3 years is on the short term side. The recent 10% correction was almost like a brief hiccup that has already been forgotten.  I could easily see a 20-30% pullback which would be painful.... but normal. But what do I know?.....I thought the market was overpriced some 7-8k points ago. As far as my AA goes, I went conservative some time ago. When I worked I was an 80/20 guy. Right now I have less than 20% in stocks and the rest in short duration bonds and a ladder of cd's. Portfolio won't grow much but I'm more about preservation at this point. A w/d rate of 1.5% and SS takes care of my budget and allows me to be conservative.


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## mathjak107 (Feb 28, 2018)

i stay 40-50% equities and learned along time ago not to try to play the timing game .   equities are for eating in 20-30 years god willing .short term i could not care less how they cycle . it is all part of it .


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## Bullie76 (Feb 28, 2018)

Don't play the timing game either.


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## OneEyedDiva (Mar 1, 2018)

mathjak107 said:


> returns will likely be more subdued after the big run up but things are still very positive looking .
> 
> don't fall in to a false sense of confidence because you are getting a dividend . a dividend is no different than you selling equal dollars from your portfolio . down is just as down and it is only total return that counts.
> 
> ...



I always like to read your take on a financial subject. I've read what you said about dividends before but here's what you seem to have left out each time. Yes dividends reduce the share price (NAV) by the amount of the dividend per share but if reinvested, you also get more shares. And more times than not (at least with my investments), those shares regain the NAV they were at before the dividend payout plus more. So if I had 1400 shares of a particular fund and the reinvested dividends throughout 2017 added generated 100 more shares of that fund which saw the dividend reduce it from $18.50/share to $18.25/share then the share price rises to $19.50, I've made $1.25 on 1500 shares (instead of just 1400 shares). If that happens with several thousand shares of various funds and ETFs, then the owner makes money two ways on those dividends. That 100K does indeed become 105K or more. I keep a dividend tracker that shows the increased value of the added shares according to the daily change in share prices. Unfortunately it stopped automatically tracking daily share price and net increases after a certain line but I can still do it manually whenever I want.  I can no longer find that particular template


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## mathjak107 (Mar 1, 2018)

don't get confused by the market action or number of shares . it is only total  dollars  in the investment that is  compounding for you  . 

if you had 100k in stock and it grew 5% over the year as an example you have 105k in value . if it pays out  a 5% dividend you have 100k left  at the open once the exchanges reduce you and a 5K dividend . so you reinvest it . you have the exact same 105k you had the night before once it is back in and being  compounded on by the markets . the dividend  did not add any additional dollars to your investment than you had . it merely switched the consistency  from  say  1000 shares at 105 dollars a share to 1050 shares at 100 a share at the open . dollars compounding are the same as you had pre ex div . whether you have 1000 shares at 105 or 1050 shares at 100 at the ring of the bell is irrelevant . only the dollars compounding  are acted on . 

if your stock went up 10% the next quarter  and you reinvested than it is 10% on 105k , if you pocketed the dividend than you only had 100k compounding that 10%.

people get confused because the shares are growing and markets are running with the price but it is far more basic than that . as you see in the example it is only about dollars left compounding on by the markets . the consistency of the  make up of the investment is irrelevant .

1 share of a 100k stock going up 10% is the same as 2 shares of a 50k stock going up 10% . you are just confusing the issue in your example . it is only about i started with x invested , i saw y  percentage of compounding on those opening dollars  and this is my new balance .

there is zero  additional dollars added when that dividend is paid out then you had the evening before it went ex div  , you are just starting out of the gate with more shares if you reinvested at a lower value . whatever the percentage is the markets move it up or down is on those opening dollars not shares .


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## Bajabob (Mar 1, 2018)

I'm heavily into dividend-paying stocks too. Many companies pay a good dividend, and this seems to function independently from what the stock market as a whole is doing.


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## mathjak107 (Mar 2, 2018)

no it does not . that is nonsense . stocks are stocks period .    how a total return is arrived at is   irrelevant . you have sectors that just react differently at times than others so a company appears immune .

now you can argue that historically high quality dividend stocks  tended to out perform a bit  but over the years  because a company that was giving it's money away was looked at as a healthy company . that theory has faded and the dividend payers became the least efficient at compounding investors money .

as award winning fund manager chuck akre said , compounding investor money is the key to growing money.

a penny doubled and compounded every day for only 31 days is over 10 million bucks . such is the power of compounding

what is interesting is dividends have increased to the highest levels since 1998 with a record increase of 17.8 billion dollars in increased  dividends  payed out  .

all dow stocks pay dividendsand 84% of the s&p 500 does too 

but according to a study done by howard silverblatt at s&p those dividendshave been coming at a price as they go up and up..

a good part of that capital from free cash flow is gone forever and no longer available for .compounding

mid-caps and small caps who pay little in dividends have been far and away providing far better compounding and use of investor money for much greater returns..

in fact one of the least efficient ways to  attract and grow investor money now is paying it out as a dividend.

as chuck akre said ,free cash flow in a company can be used to compound by buying back its own stock, investing in its own company or buying other companies . cash flow paid out as dividends loses its compounding ability and much of it is gone forever and can no longer compound.

many of the great companies in the s&p 500 have lagged behind their non dividend payers in the  micap  and small cap markets who now seem to be much more efficient at generating compoundingon investor money.

midcaps and small caps have compounded the last 5 years at rate of 5-6% higher then their dividend paying cousins.


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## mathjak107 (Mar 2, 2018)

in fact lets look  at the group referred to as the dividend aristocrats .

you keep seeing just invest in this group and call it a day .

however what constitutes this group changes all the time so get ready for lots of selling trying to keep up as they get bumped and replaced AFTER THE FACT THEY DID NOT LIVE UP TO EXPECTATIONS . you could be behind the curve here very easily .

these dividend aristocrats are not somehow immune to all the things that effect company's and stocks . Just like other companies, their outcomes change.

in 2009 there were 52 stocks that met the group’s strict criteria.

As of 2012, there were 51.

But of those 51, 13 were different than the original set. So over the course of just 3 years, there was a 27% change in the group’s composition. 

in fact going back to 1989's list :

Of those 26, seven are still on the list today, ten were removed because they either cut or froze their dividend, four were removed for an unknown reason, and the remainder were aquired at some point. So at least ten of the 26 had an outcome that is different from the assumption of dividend growth every year through thick and thin.

Indeed, dividend stocks are a fine investment vehicle, but  but they are stocks at the end of the day and are no different


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## garyt1957 (Mar 5, 2018)

I expect a lot of volatility going forward but expect we'll end up ahead at the end of the year. The economy is in high gear and the tax cuts should raise company profits enough to help support the high P/E levels. My concern ,as I'm retiring June 1, is sequence of returns risk. We'll have a major correction eventually and I just hope it's not in the next couple years.


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## mathjak107 (Mar 5, 2018)

i think we will have very strong head winds .

we have a president  starting a trade war . no one wins in a trade war , it has hurt us the consumer every time.  it will either squelch global growth  which has been getting traction since 20-25% of all revenue in the 500 largest companies are based on foreign sales . increased costs on steel and aluminum will suck profits right out of  the bottom line of all companies who buy it if they don't raise prices , or will stoke inflation if they do and shaft the consumer .

we then have all that money from the tax cuts being dumped in to an already healthy economy stoking inflation fears driving up rates . 

all in all trump now seems to be making one bad choice after another that can hurt all our financial health . i have no political loyalty at all but this guy is a loose cannon


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## mathjak107 (Mar 5, 2018)

garyt1957 said:


> I expect a lot of volatility going forward but expect we'll end up ahead at the end of the year. The economy is in high gear and the tax cuts should raise company profits enough to help support the high P/E levels. My concern ,as I'm retiring June 1, is sequence of returns risk. We'll have a major correction eventually and I just hope it's not in the next couple years.


you could use a rising glide path  if you are not comfortable . reduce equities to 30-35% and then increase each year until you reach your allocation .  

once you have an up cycle then the risk of sequence risk hurting you pretty much goes away . so it really is an issue entering retirement . the good news is even if you retired in 2008 and got hammered , 10 years in at this point you are no different than any other average retiree group in history .

2008 was short and pretty much a non event to a retiree who did not exhibit bad investor behavior   . however even a moderate drop day 1 that is extended can hurt


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## garyt1957 (Mar 5, 2018)

mathjak107 said:


> you could use a rising glide path  if you are not comfortable . reduce equities to 30-35% and then increase each year until you reach your allocation .
> 
> once you have an up cycle then the risk of sequence risk hurting you pretty much goes away . so it really is an issue entering retirement . the good news is even if you retired in 2008 and got hammered , 10 years in at this point you are no different than any other average retiree group in history .
> 
> 2008 was short and pretty much a non event to a retiree who did not exhibit bad investor behavior   . however even a moderate drop day 1 that is extended can hurt


 
 I have thought of that and even seen it advised to got to zero equities and then slowly get back in. If the economy wasn't doing so well, I might go that route.


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## mathjak107 (Mar 5, 2018)

I would never go zero nor less than 35-40% . Markets never give signs or notice when they go up . All the biggest gains are always from stock market hell when it looks like there is no bottom . All the biggest drops come from when things are humming and confidence is high.

more  money is lost or given up in anticipation or preparation for the next downturn than has been lost in any downturn


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## garyt1957 (Mar 7, 2018)

fmdog44 said:


> Well said. People say, "That's OK the market will come back miss the point that last week you had $10,000 and toady you have $9,000.



But next week you may have $11,000.


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## Don M. (Mar 7, 2018)

garyt1957 said:


> But next week you may have $11,000.



That depends upon what kind of Stupidity comes out of Washington, DC in next weeks "tweets".


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## OneEyedDiva (Mar 21, 2018)

mathjak107 said:


> don't get confused by the market action or number of shares . it is only total  dollars  in the investment that is  compounding for you  .
> 
> if you had 100k in stock and it grew 5% over the year as an example you have 105k in value . if it pays out  a 5% dividend you have 100k left  at the open once the exchanges reduce you and a 5K dividend . so you reinvest it . you have the exact same 105k you had the night before once it is back in and being  compounded on by the markets . the dividend  did not add any additional dollars to your investment than you had . it merely switched the consistency  from  say  1000 shares at 105 dollars a share to 1050 shares at 100 a share at the open . dollars compounding are the same as you had pre ex div . whether you have 1000 shares at 105 or 1050 shares at 100 at the ring of the bell is irrelevant . only the dollars compounding  are acted on .
> 
> ...



Let me understand this. Are you saying that those extra shares purchased with that $5,000 dividend don't generate even more income eventually? For instance, I have a mutual fund that I purchased for around $19 a share several years ago. It generated capital gains, mostly. So if I accumulated another 100 shares via those caps and the mutual fund is now worth $51 a share, didn't at least some of those added shares increase in value by $32 each (eg: $3,200). Obviously shares were added over time so they didn't all increase by that much. Now if all the investments added 1,000 shares via divs and caps and all the investments increased by double digit figures annually, as most of my investments have, I don't understand why you see those extra shares as "the same dollars". That original $100,000 may become $132,000 or $125,000 or whatever due to those additional shares earning money via share price increases and additional divs and/or caps being paid on them.


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## mathjak107 (Mar 21, 2018)

there is no free lunch . with every payout you get more share's if you reinvest  but the price is reset lower as a starting point . so if market action increase your investment  10% it is 10% from that reset price .

it is very simple really .

if you bought 100k of xyz and it went up 10%  you have 110k in stock . so now it pays out a 10% dividend and  you have 11k in a dividend and 89k left invested in value. there is an automated reset of the price by the amount paid out every time . so your starting out with the share  price lower . 

if  next year it went up 20% then it is up 20% on 89k if you did not reinvest .

if you did reinvest , regardless how many shares make up your investment is is still the same 110k you had going up 20%

do not get confused by number of shares . it is like a stock split , you have more shares at a lower price but the same value in dollars as you had .

money does not drop out of the sky when a dividend is paid . it merely redistributes the value you already had the night before . it is basically a wash if you reinvest  or you have less dollars in the investment if you don't .

getting a 4% dividend is no different than taking equal dollars from a portfolio of non dividend payers with the same total return .

the dividend takes the value of your investment and redistributes it as more shares at a lower price . taking the same amount from a portfolio of non div payers would have less shares at a higher price because that would see no set back .

if total returns are equal balances and income will be equal .


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## mathjak107 (Mar 21, 2018)

even simpler . you had 100 bucks in stock pay out a 1 dollar dividend that closed on the day at 102 . . so at the open the stock is reduced to 99 bucks and you have 1 dollar in pocket .

you had 99 in stock at the open  go up 3% to 102.00 by the close plus 1 dollar in pocket .that is a total value of 103 .


you reinvested the  1 dollar so you have 99 left in your original investment plus a fractional share worth 1 . if it all goes up 3% it is the same  value of 103 dollars .


103 invested vs 102 and a 1 dollar in pocket if not . nothing changed as far as the return .


the return is the same 3% . it is just on different investment amounts depending on whether you reinvest or not . in both cases you open at 99 regardless and go to 102 .


only the amount of shares acted on changed depending if you reinvest or not but if you never got the dividend and the stock went up the same 3% it would still be 103  . it just would not have been rolled back to 99 .  it would have been 3% on 100 in stock , the same as a reinvestment ..


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## Don M. (Mar 21, 2018)

The stock markets can be a roller coaster, and a bit stressful, tracking the ups and downs.  However, there probably isn't a better way to maintain and grow one's assets....interest in a bank account, for example, is almost non-existent.  If a person monitors their accounts regularly, and takes advantage of the "trends", they should be able to enjoy their retirement without worrying about next months bills.  Presently, I'm a bit amazed that the markets haven't taken a major nosedive since 2007/2008, and most of the "experts" seem to think that this positive market performance will continue for the immediate future....but, I'm still cautious, and ready to rebalance quickly if things change.


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## mathjak107 (Mar 23, 2018)

i agree .  the problem is most people have very mis-informed views and a lack of general knowledge about financial planning for retirement .

how many times have you heard  that if you have equities in retirement and it was 2008  that you may not have enough left  to support you ?

sounds like it makes sense , however there is far more that goes in to that retirement equation .

here is the part you miss .

lets take bill and john .

both have a million bucks and decide to retire . bill retires in 2008 and gets caught up in the crash so he draws draws 30k which is 4% from his 50/50 allocation which now has 750k left.
so 4% of 750k is 30k .

john is the gun shy guy and he has only 10% equities going in to retirement and close to 1 million left. but johns allocation can never support 4% in retirement so john is forced to draw a max of 3% of 1 million or only 30k at a max , . you can see incomes are the same .

this is why i say you can't just look at 1 factor , it is the whole picture . it is everything as a whole both going in and being in retirement .

it is not just magically taking numbers and subtracting numbers . there are draw rates that can support higher draws and confirmed draw rates that will likely fail if not using equities that have to be accounted for .

in fact , if markets were being counted on to raise that 1 million for retirement , if bill hit that 1 million with his more aggressive portfolio,  and john was far  more conservative,  the real life outcome would be john would not even have a million dollars saved going in to 2008 .


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## OneEyedDiva (Mar 24, 2018)

mathjak107 said:


> i agree .  the problem is most people have very mis-informed views and a lack of general knowledge about financial planning for retirement .
> 
> how many times have you heard  that if you have equities in retirement and it was 2008  that you may not have enough left  to support you ?
> 
> ...


I've been reading that 4% rule is no longer feasible as a "one rule fits all" thus somewhat obsolete. What do you think about that and the other method (bucket aka envelope)? What method do you use?


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## mathjak107 (Mar 24, 2018)

the 4% rule is a good starting point . no one spends like a robot . you adjust as time goes on . it is good for projecting a day 1 income .

i use a dynamic method. it sets goal posts for our yearly spending that i try to stay within .  we look at our total portfolio balance and can spend 4% of that amount . if markets are up you get rewarded. if markets are down you take the higher of 4% or 5% less than you took the previous year. that avoids to steep of a cut .

buckets offer no advantage to just rebalancing and creating cash that way .

we like to compartmentalize  things so our brains like buckets but having  cash buckets vs just rebalancing is actually not as good as rebalancing.

the 4% safe withdrawal rate requires at least 40% equities to hold .

breaking down just what it takes to support 4% inflation adjusted , it takes a minimum of a 2% real return over the first 15 years of a 30 year retirement . if you get less the first 15 years you are usually spent down so far that even the best of times can't bring you back .

those who retired in 1965/1966 had the worst of times early on followed by the best bull markets in history  but it was to late .


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## fmdog44 (Mar 29, 2018)

I picked a lousy time to buy Amazon:sorrow:


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## Seeker (Mar 29, 2018)

All I know is our stocks are up and down right now they are UP...I'm good.....


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## mathjak107 (Mar 30, 2018)

fmdog44 said:


> I picked a lousy time to buy Amazon:sorrow:


i dabble in individual stocks but they have never been my serious investing .

i never want to be held captive to the whims of a particular company . market risk is tough enough to deal with but adding individual company risk in to the mix too makes things even harder


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## Bajabob (Mar 30, 2018)

I invest much as you do


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## mathjak107 (Mar 30, 2018)

the problem i have with individual stocks is i have to pick the right company , at the right time , in the right market sentiment  in the right sector . even if i get all that correct i still have no idea what their competitors are doing . then they miss earnings by a dime and fall 10 or 20% .

i like just market volatility to deal with. my investing requires no time whatsoever for the most part .


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## JimW (Mar 30, 2018)

mathjak107 said:


> the problem i have with individual stocks is i have to pick the right company , at the right time , in the right market sentiment  in the right sector . even if i get all that correct i still have no idea what their competitors are doing . then they miss earnings by a dime and fall 10 or 20% .
> 
> i like just market volatility to deal with. my investing requires no time whatsoever for the most part .



Mathjak,

My wife and I are looking to invest a bit of money. We've been doing some research on "middle of the road" investments that aren't too conservative, but aren't really risky either. We've narrowed it down to 3 investments that we feel fairly comfortable about, I'd like to get your opinion on the 3 if you wouldn't mind. Before making any final decisions we do plan on sitting with a financial advisor for further input on the 3 investments and exactly where to invest the money.

Any input you could give on the following would be appreciated.

1. Mutual Funds

2. AAA Rated Bonds

3. Fixed Annuity


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## mathjak107 (Mar 30, 2018)

it really is impossible to say without specifics .


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## JimW (Mar 30, 2018)

mathjak107 said:


> it really is impossible to say without specifics .



Are any of those 3 a non-starter for you, or are all of them okay at the right times in the right places? Do you favor one over the others?


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## mathjak107 (Mar 30, 2018)

i have always used funds as an investor but of course funds encompass a whole lot of territory .   i am not a lover of only high quality bonds right now . i like a broad mix ranging from some high quality ,some lower quality , all different duration's , foreign bonds , junk and emerging market .

as far as annuities that depends on what kind and the roll they are playing vs investing alone .

retirement planning can be very complex once you introduce different goals ,tax situations and personal pucker factor . many times for a couple a single immediate annuity and permanent life insurance which is 100% tax free is a better way to go than a joint annuity . but i don't give advice  to others , i only talk in general terms .


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## JimW (Mar 30, 2018)

mathjak107 said:


> i have always used funds as an investor but of course funds encompass a whole lot of territory .   i am not a lover of only high quality bonds right now . i like a broad mix ranging from some high quality ,some lower quality , all different duration's , foreign bonds , junk and emerging market .
> 
> as far as annuities that depends on what kind and the roll they are playing vs investing alone .



Thank you for the info.

We were leaning towards an index mutual fund that tracks the S&P 500.


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## mathjak107 (Mar 30, 2018)

that is fine . i use mostly manged fidelity funds and have beaten the s&p 500 over the long term but it can be a fine choice. what allocation ?


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## JimW (Mar 30, 2018)

mathjak107 said:


> that is fine . i use mostly manged fidelity funds and have beaten the s&p 500 over the long term but it can be a fine choice. what allocation ?



Not sure about allocation as of yet, that's the stuff we need an expert for.


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## mathjak107 (Mar 30, 2018)

what draw rate are you hoping to be able to take and for how many years ?


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## JimW (Mar 30, 2018)

mathjak107 said:


> what draw rate are you hoping to be able to take and for how many years ?



Not really sure on the draw rate as of yet because we don't know what the fee structures are for the different funds. As for time, probably an 8-10 year window unless our plans change.


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## mathjak107 (Mar 30, 2018)

so i take it you are saying you have 8-10 years from retirement .

i can't tell you what you should do but up to about  4 years out we were 100% equities always .. our retirement model is 50/50


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## OneEyedDiva (Apr 2, 2018)

mathjak107 said:


> as top researcher michael kitces said :
> 
> _Cash reserve strategies that hold aside several years of spending to avoid liquidations during bear markets are a popular way to manage withdrawals for retirees. In theory, the strategy is presumed to enhance risk-adjusted returns by allowing retirees to spend down their cash during market declines and then replenish it after the recovery. Yet recent research in the Journal of Financial Planning reveals that the strategy actually results in more harm than good; while in some scenarios the cash reserves effectively allow the retiree to “time” the market by avoiding an untimely liquidation, more often the retiree simply ends out with less money due to the ongoing return drag of a significant portfolio position in cash. As a result, the superior strategy for those who want to alter their asset allocation through market volatility (the effective result of spending down cash in declines and replenishing it later) appears to be simply tactically altering asset allocation directly, without the adverse impact of a cash return drag. Nonetheless, this still fails to account for the psychological benefits the client enjoys by having a clearly identifiable cash reserve to manage spending through volatility – even though the reality is that it results in less retirement income, not more.
> _


Oh gee Mathjack...could this be any smaller?!! I see you mentioned bonds. We Muslims are not supposed to invest in bonds or any other interest bearing accounts, although the edict has been relaxed to allow miniscule amounts like the extremely low rates banks currently pay. This was because of the detrimental affect interest had on the poor who needed to borrow money over 1,400 years ago. We see today the detrimental affect todays borrowers and credit card users face as well.  Anyway, I remain heavily invested in the market (mostly funds & ETFs) because of that and because I don't need to take any withdrawals except for the RMDs (very small amounts) which started last year. My investment to cash ratio is 75/25.

Also it seems you are using the 4% rule (basically), making adjustments as necessary and it's working for you. Thank you for sharing your method.


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## JimW (Apr 2, 2018)

mathjak107 said:


> so i take it you are saying you have 8-10 years from retirement .
> 
> i can't tell you what you should do but up to about  4 years out we were 100% equities always .. our retirement model is 50/50



We are currently 13 years from retirement, we are 54(me) & 53(wife) yrs old. Our plan is to either use that money as payment towards our retirement home which we plan on purchasing in about 8 years, or secure it in some other less risky investment so we don't lose it.


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## mathjak107 (Apr 2, 2018)

lose it?  short term money should never be in equities . however when it comes to long term money even at 65 you have money you will not eat with for 20-30 years . i can't think of 1  long term period in our history , investors in diversified equity  funds or a diversified  portfolio  not only never lost a dime but did not make substantially more .

when you match investments to appropriate time frames loosing it has never been a problem . it is bad investor behavior that causes the losses not markets .


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## mathjak107 (Apr 2, 2018)

OneEyedDiva said:


> Oh gee Mathjack...could this be any smaller?!! I see you mentioned bonds. We Muslims are not supposed to invest in bonds or any other interest bearing accounts, although the edict has been relaxed to allow miniscule amounts like the extremely low rates banks currently pay. This was because of the detrimental affect interest had on the poor who needed to borrow money over 1,400 years ago. We see today the detrimental affect todays borrowers and credit card users face as well.  Anyway, I remain heavily invested in the market (mostly funds & ETFs) because of that and because I don't need to take any withdrawals except for the RMDs (very small amounts) which started last year. My investment to cash ratio is 75/25.
> 
> Also it seems you are using the 4% rule (basically), making adjustments as necessary and it's working for you. Thank you for sharing your method.




wow that is not the size i see when i post . i have to see how to enlarge the fonts .​


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## OneEyedDiva (Apr 2, 2018)

mathjak107 said:


> wow that is not the size i see when i post . i have to see how to enlarge the fonts .​


I don't know if you are using a computer, phone or tablet when you post but on my desktop computer, I see an area directly above the field where I type text that gives several options including making the text bold, changing font styles and sizes and areas to facilitate posting links, photos, videos, etc.  When I'm posting in another forum with similar features I don't see those options when using my tablet.  i never tried posting via the tablet on this site. Now I highlighted this reply and clicked on Size>2.


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## mathjak107 (Apr 2, 2018)

​testing . how is this ? i picked #4  from the font size


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## JimW (Apr 2, 2018)

mathjak107 said:


> lose it?  short term money should never be in equities . however when it comes to long term money even at 65 you have money you will not eat with for 20-30 years . i can't think of 1  long term period in our history , investors in diversified equity  funds or a diversified  portfolio  not only never lost a dime but did not make substantially more .
> 
> when you match investments to appropriate time frames loosing it has never been a problem . it is bad investor behavior that causes the losses not markets .



Yeah lose it. We don't want to get close to retirement age with an investment that has returned some decent money and see it go down because we held onto it for too long. If we get what we want out of it, then we'll probably secure it and either use it for a house purchase, or put it into something less risky like a fixed annuity, rather than taking a chance on it diminishing in value. Then again, things might change for us by then, who knows. But the #1 rule we are going to follow as close as possible, is to not lose what we already have. This money we are looking to invest is over and above what we have set aside to secure our retirement, so we're willing to take a bit of a chance with it, but not too much if we can avoid it.


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## mathjak107 (Apr 2, 2018)

as long as you can provide the level of inflation adjusted income for decades  you can do it any way you like .


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## JimW (Apr 2, 2018)

mathjak107 said:


> as long as you can provide the level of inflation adjusted income for decades  you can do it any way you like .



I agree, I'm just not as open to higher risk investments as some are. I'd rather be safe and secure and be able to sleep at night than worrying about it constantly.


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## Don M. (Apr 2, 2018)

The markets go up...the markets go down...that is part of the "game".  However, over the long term, there is probably no other investment strategy that works as well as a moderately conservative stock market portfolio.  Money in the bank just gathers dust.  Annuities seem to be a great option...for the Insurance companies...with their paltry returns.  Investing in real estate is a potential plus...IF it is buying rental properties, etc., and IF the maintenance costs don't eat up the profits.  An individual's "house" should Not be considered an Investment...rather is should be looked upon as a place to eat, sleep, and bathe....and should be fully paid off by the time a person retires.


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## mathjak107 (Apr 2, 2018)

the only problem is that you never develop the cushion with fixed income only. don't forget those levels you fall from  and down to in bear markets are rarely the levels of the highs you even see with fixed income . so while we all worry about the drops the realty is we are falling from balances we would never even be at as well as the lows are way higher than the highs of fixed income  . i can lose 30% and still be higher than i would be if i avoided equities .


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## JimW (Apr 2, 2018)

mathjak107 said:


> the only problem is that you never develop the cushion with fixed income only. don't forget those levels you fall from  and down to in bear markets are rarely the levels of the highs you even see with fixed income . so while we all worry about the drops the realty is we are falling from balances we would never even be at as well as the lows are way higher than the highs of fixed income  . i can lose 30% and still be higher than i would be if i avoided equities .



I certainly understand what you're saying and this is why I ask questions when I'm not sure. We are going to meet with a financial advisor in a couple of months for some advice of what we can do and take it from there. We may meet with more than one advisor before we decide what to do. I thank you for your input!


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## Don M. (Apr 2, 2018)

The biggest threat to our nations....and individuals, financial security...is a certain Unnamed Individual in Washington, DC, who appears to be all "Tweet" and no Brain.


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## JimW (Apr 3, 2018)

Don M. said:


> The biggest threat to our nations....and individuals, financial security...is a certain Unnamed Individual in Washington, DC, who appears to be all "Tweet" and no Brain.



I really don't know what the hell he's thinking, someone needs to stop him. This latest thing with going after Amazon is bizarre at best. The damage to the brick and mortar stores done by Amazon should have been addressed 15-20 years ago. It's far too late now, the damage is done, the brick and mortar stores aren't coming back. Trump announcing he is going after one of the biggest companies in the world is beyond dumb. If he's going after Amazon, then he'll have to go after Walmart, Target and most of the other big chain stores as well.


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## JB in SC (Apr 3, 2018)

Diversify and don't let your portfolio become stagnant. Even a modest portfolio can develop a nice income stream. Have the ability to turn that income stream off or on as your needs change.


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## wvnewbie (Apr 4, 2018)

Great discussion everyone - Thanks!  MY RMD is enough to keep me comfortable.  I have pulled out of the market b/c of the stupidity in the White House and b/c I fear a major crash is coming.  Lots of cash under the mattress.  Now it is "High Risk = High Return".  Investing in Lottery Tickets!


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## mathjak107 (Apr 5, 2018)

timing this stuff is a foolish game. getting out is easy . but what happens is markets flip on a dime before anything changes and head up . study after study shows that if you missed the biggest gains when markets flip and look like a suckers rally you would have done better just simply riding the cycle .

investors make this mistake over and over thinking they are going to time the entry point again and shoot themselves in the foot


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## JB in SC (Apr 5, 2018)

mathjak107 said:


> timing this stuff is a foolish game. getting out is easy . but what happens is markets flip on a dime before anything changes and head up . study after study shows that if you missed the biggest gains when markets flip and look like a suckers rally you would have done better just simply riding the cycle .
> 
> investors make this mistake over and over thinking they are going to time the entry point again and shoot themselves in the foot



Agreed, no telling how many bailed out in 2008 only to regret it later. When everyone is selling, someone is buying. Sometimes you have to swing for the fences.


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## Bullie76 (Apr 5, 2018)

JB in SC said:


> Agreed, no telling how many bailed out in 2008 only to regret it later. When everyone is selling, someone is buying. Sometimes you have to swing for the fences.



I swung for the fence when I was younger.....no more. I have some in the market, but not a lot. Not trying to time anything, just not interested in riding out big swings at this point in my life.


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## mathjak107 (Apr 6, 2018)

those of us who never made huge salaries had to grow our money via investing .

but risk and volatility are not the same thing .


[FONT=&quot]risk and volatility are two very different things .
[/FONT]
[FONT=&quot]the natural market cycles for a long term investor are volatile and owning diversified funds is volatile but has little risk .[/FONT]

[FONT=&quot]risk comes when you try to pick individual stocks and are held captive to the whims of a particular company , or betting on the next google. risk comes from mis-matching investments and time frames .[/FONT]

[FONT=&quot]there is very little risk in diversified funds over the long term . it just is volatile . volatility means little to long term investors .[/FONT]

[FONT=&quot]like i said there is no data that shows that investors with lower pucker factors tend to stay any better in balanced funds . their bad investor behavior just seems to get triggered at lower levels .[/FONT]

[FONT=&quot]the important thing is just find an allocation that meets your goals and run with it turning off the noise .[/FONT]

[FONT=&quot]i never made a big salary so growing my assets via investing was a priority . volatility and not risk was just fine . now in retirement 40-60% equities meets my goals .[/FONT]


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## Bajabob (Apr 6, 2018)

*a different view*

I don't agree that my receiving a dividend from one of the companies in my portfolio reduces my investment in that company. If I had 100 shares, I still have 100 shares. I'm heavily into dividend paying companies, and by reading the list, on a weekly basis, of companies increasing their dividends and of those reducing or eliminating their dividend, the former list is always much longer that the latter list. This tells me that the economy has been in pretty good shape, for an extended period.


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## mathjak107 (Apr 7, 2018)

well you can disagree , but you would be wrong . you are not even talking about the same thing i am .

if you have 100 shares , after a pay out you have the same number of shares . but  each share's value is reduced  . it is finra law that every share price must be automatically reduced at the open by the same amount.

money does not get created out of the air . why would a share holder ever want to pay the same thing before and after millions of dollars are taken out of a company ? the answer is they wouldn't so finra requires the price per share to have an equal set back before the stock can trade . all percentages up or down on your investment is on the dollars you have left invested at the open . .


if you have 1000 shares of a 100 dollar stock that is a 100k investment . if it goes up 10% you have 110k . if it pays out a 10% dividend  you get 11k  in pocket and 1000 shares at 99 dollars a share  or a total of  99,000 left compounding .

market action now works on the 99k  .  if markets take it up 8% that it is 106,920.

had you reinvested the dividend instead you would have had  1010 shares at 99.00 or the same 100k you had the night before ex div. that  100k going up the 8% % would have you at  110k .

so you are looking at what is happening ,wrong .

yes you have your share count the same after the payout  but no it is not the same price as it closed at the night before  .it is lower and not by markets but by finra law.




FINRA MANUAL :

5330. Adjustment of Orders

(a) A member holding an open order from a customer or another broker-dealer shall, prior to executing or permitting the order to be executed, reduce, increase, or adjust the price and/or number of shares of such order by an amount equal to the dividend, payment, or distribution on the day that the security is quoted ex-dividend, ex-rights, ex-distribution, or ex-interest, except where a cash dividend or distribution is less than one cent ($0.01)


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## Bullie76 (Apr 7, 2018)

mathjak107 said:


> well you can disagree , but you would be wrong . you are not even talking about the same thing i am .
> 
> if you have 100 shares , after a pay out you have the same number of shares . but  each share's value is reduced  . it is finra law that every share price must be automatically reduced at the open by the same amount.
> 
> ...



Why do you feel the need to go into this detail everytime someone makes a post about dividends? Just reference one of your previous multiple post on the subject.


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## mathjak107 (Apr 7, 2018)

obviously if they are arguing the point they did not follow what was written . i gave examples here numerous times.

i rather re-explain it so they learn  than have them go on believing mis-information . as you see this topic is so mis-understood .


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## fmdog44 (Apr 7, 2018)

Worse than never investing is investing without some form of strategy. I see on this thread some folks are in the market but don't have a handle on some basic fundamentals. This market we are witnessing is being tied to Trump rightly or not but it is being said and that can sway some investors. I'm sure some are buying on dips and some are panic selling, both right now are not the best way to go in my opinion. I am standing pat but I am doing so solely for me and how I am invested which is conservative at my age and wealth. I was a aggressive investor at 30 yrs. of age and won and lost big back then. I am maybe a little too heavy in cash but one rule of investing is do what you are comfortable with.


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## mathjak107 (Apr 7, 2018)

i am 50/50 in retirement and that stays put no matter what i think or markets do .

117 30 year cycles so far since 1871 and 40-60% equities has worked very well . on the other hand inflation has been the bogey man and killed off more than half (64) of those 117 cycles with fixed income only .


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## Aunt Bea (Apr 8, 2018)

mathjak107 said:


> i am 50/50 in retirement and that stays put no matter what i think or markets do .
> 
> 117 30 year cycles so far since 1871 and 40-60% equities has worked very well . on the other hand inflation has been the bogey man and killed off more than half (64) of those 117 cycles with fixed income only .



mj,

I'm curious about how you look at your SS and any defined benefit pension plans when determining your investment allocation.

I've read that some people view the income from those _guaranteed benefits_ as part of their conservative/bond holdings and increase the stock portion of their allocations. e.g. If 50% of income is in the form of SS/pensions they would keep 100% of investments in stocks to generate the other 50% of income.

I ignore those guaranteed sources of income when making my allocations.

Just curious what you think and how you look at it.

Thanks, B


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## mathjak107 (Apr 8, 2018)

i don't look at ss as anything but an income source  . it plays no part in how i allocate because it plays no roll in portfolio safe withdrawal rate stress testing .

so if i need 100k as an example and 40k is social security ,pension ,etc  then the portfolio has to provide 60k . so all we are interested in , is that our allocation has a high success rated spinning off that 60k.

 1,500.000 at 4% could safely provide that as stress testing different allocations show .

50/50 would be an excellent choice . you want at least 90% success of already making it through all the times frames . you can see the more conservative you go the riskier it gets trying to spin off anything near a 4% draw.

fixed income alone would be the riskiest bet of all .


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## Aunt Bea (Apr 8, 2018)

I don't look at it either but the logic used is interesting.

In your example of needing 100K with 40K coming from guaranteed sources of income, these folks would assign that guaranteed income a portfolio _value_ of $1,000,000.00 based on a 4% withdrawal rate. That would allow them to allocate the $1,500,000.00 portfolio to $1,250,000.00 for stocks and $250,000.00 to more conservative bond holding. An allocation of 80-85% stocks and 15-20% bonds. It would be as though you had no guaranteed income and a portflio of $2,500,000 allocated at 50/50 to generate the $100k in required income.


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## mathjak107 (Apr 8, 2018)

i would not do that ,in fact no calculator does that .  it subtracts out any pension income ,ss income and annuity income since only the invest-able assets in the  portfolio has to be stressed tested .

 a safe withdrawal rate stress tests the portfolio "only" including the fact it can go to zero . there is  NO SEQUENCE RISK IN SS AND IT WILL CLOUD THE STRESS TESTING .

you would have a portfolio that can end up extremely volatile trying to count ss as part of invest-able assets . you  would end up with an 83/17 allocation . that portfolio would be extremely volatile .
not a great idea in my opinion . you  also can't rebalance social security so to speak . what do you do as stocks keep growing and growing over time ?  you can be 80 years old and 95% equities .

if you had a job and income would you count that as part your portfolio  allocation ? i sure wouldn't it makes little sense . well the same applies to ss income and pension income. it is outside the scope and purpose  of your portfolio . it is an income source  but should play no part in a portfolio allocation or strange things can happen  like 95% equities .

there are no retirement calculators that count future  income like pension or ss  as if it was a lump sum bond allocation ..


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