Retirement

BoxheadTim said:

docwyte said:

 

Sure I do.  I just don't have the money to execute right now.  If you do, buy in San Francisco (almost anywhere in the city), Boulder Colorado (City has a no growth law in place) and the beach communities in San Diego.  So La Jolla, Del Mar, Cardiff by the Sea, etc. 

When the real estate market crashed, those areas sagged a percentage point or so.  Then kept on blasting through the roof as things recovered.

If I were in the market for an investment property, I would not buy in San Francisco right now. It's a "past performance is no guarantee of future performance" thing - real estate there has had a massive runup in the last few years that looks awfully like the dot-com boom to me. Silly Valley and SF is a boom/bust cycle place and I don't see that boom going on for that much longer.

Companies have started relocating from the Bay, or didn't relocate to the Bay (which used to be a major requirement to get VC funding and to an extent, still is) in the first place.

Oh, and they've had a massive condo building boom with a lot of that inventory schedule to come on the market in the next couple of years. That should ease some of the supply pressures.

There are two approaches to investing, stocks or real estate

one is called market timing, where you try to time the market. The other is called dollar cost averaging. Where you buy steadily. 

Most experts report that market timing attempts tend not to be as rewarding as dollar cost averaging.  

Im inclined to agree  with dollar cost averaging, except wow is it ever sweet when you can buy in a down market and sell at the peak. 

I take the fact that the US stock market has soldiered along in its current form for over 200 years (New York Stock Exchange Constitution established in 1817) as a proof that it is not possible to systematically outsmart the market…if day trading or any other get rich quick technique actually worked, large amounts of money would constantly be siphoned out of the market causing institutional and main stream investors to consistently be on the losing end of the trades and they would quickly move their assets to other investment opportunities.

Additionally, I’m a practicing statistician…given that there isn’t a single account of a Ph.D. statistician becoming a billionaire by creating and running some trading algorithm is an additional proof that it can’t be done. There are 100’s of Ph.D. statisticians out there that have invested huge amounts of time searching for that algorithm. All those people that try to sell you software and books and stuff based on the promise of beating the market are, in effect, claiming to be smarter at math than a virtual army of Ph.D. math people; laughable claim. Besides, If I knew how to beat the market, the absolute last thing I would do is share the information with anybody.

Personally, I just dollar cost average to buy and hold ultra low load index funds (VFINX is my favorite but there are many other excellent funds). Occasionally, I’ll buy a specific equity to spice things up a little…one was Lucent and I lost my a$$ on it another was Amazon which I bought at $47 and it’s now at $1,684 which covers my Lucent loss along with providing enough to easily, easily put a brand new 911 in my garage along with the associated capital gains / sales / registration taxes.

Bottom line, I have, on average, beaten the market by picking individual equities but largely due to luck so it’s not worth the risk. I’m 53 and I’m ahead of schedule in terms of retirement planning so I’m content to just sit back and let compounding returns do their magic.

In reply to RX Reven' :

Well said and brilliantly explained. Buying Amazon at $47?  Wow!  

At  53  assuming decent actuarial numbers  you should have 3-4 more decades to capitalize on growth and inflation in the market. (  assuming you don’t intend to pull out of the market completely the day you retire) 

Slow steady in, slow steady out approach.  

Unless you do the What if  game.  

What if- the current trade wars leads to the same results we had in the 1920’s  the Great Depression 

What if the debt load we carry leads to worse than post Vietnam inflation? 

What if  the current aggressive military posturing leads to war with one or both of our major opponents? 

Then there are the potentially unknown events.  Which given the amount of money we are discussing  could have potentially devastating economic impacts on the American economy 

Attempting to account for catastrophic "what if" scenarios would almost need to be another thread unto itself.  Mostly centered around the concept of self-sufficient (as much as possible) "home-steading" and gets into borderline prepper territory. 

In reply to frenchyd :

Hi frenched,

I’m a statistician not an unjustifiably self-confident fool so I’m fully aware of the fact that there is nothing I can do to absolutely ensure that I’ll accomplish my financial objectives.

You listed three major concerns…at any given time in the 200 year history of our stock market, there have been many things to worry about and yet, when you pull back and take a long view (say decade+) you see a remarkably stable upward trend.

As they say, the rich get richer…relative to this discussion, that means positioning yourself to be able to ride out market corrections by living well below your means, having multiple income streams, maintaining significant cash reserves, etc..

My current asset allocation is something like 28% of it is in the form of home equity, 68% is in stocks (85% of which in index funds), and 4% of it is in precious metals / cash (notice zero bonds).

My plan is to retire with significantly more than I need which will allow me to remain fairly aggressive and not change my asset allocation to include bonds and other weak sauce crap just to be safe.

I daily a 2003 Ford Explorer even though I could easily drive anything I want because it’s a reliable, comfortable, and capable vehicle and I don’t give two E36 M3’s and a wet fart about impressing people.

It’s this kind of attitude that allows me to capture the excellent long term gains the stock market offers without exposing myself to too much risk…all of my cars are paid for, I pay off my credit cards at least every other week, I’ve got 88% equity in my home (which is enough to buy three average American homes if need be).

RX Reven' said:

In reply to frenchyd :

Hi frenched,

I’m a statistician not an unjustifiably self-confident fool so I’m fully aware of the fact that there is nothing I can do to absolutely ensure that I’ll accomplish my financial objectives.

You listed three major concerns…at any given time in the 200 year history of our stock market, there have been many things to worry about and yet, when you pull back and take a long view (say decade+) you see a remarkably stable upward trend.

As they say, the rich get richer…relative to this discussion, that means positioning yourself to be able to ride out market corrections by living well below your means, having multiple income streams, maintaining significant cash reserves, etc..

My current asset allocation is something like 28% of it is in the form of home equity, 68% is in stocks (85% of which in index funds), and 4% of it is in precious metals / cash (notice zero bonds).

My plan is to retire with significantly more than I need which will allow me to remain fairly aggressive and not change my asset allocation to include bonds and other weak sauce crap just to be safe.

I daily a 2003 Ford Explorer even though I could easily drive anything I want because it’s a reliable, comfortable, and capable vehicle and I don’t give two E36 M3’s and a wet fart about impressing people.

It’s this kind of attitude that allows me to capture the excellent long term gains the stock market offers without exposing myself to too much risk…all of my cars are paid for, I pay off my credit cards at least every other week, I’ve got 88% equity in my home (which is enough to buy three average American homes if need be).

Heading into 2005 I was in a similar position, secure, total of my debts  including the whole mortgage was less my income for the year.  Fully funded retirement at my company, nice fat IRA climbing in value, 401k loaded. Nice bank balance  

I took my oldest to the college of her choice  life was good.  

Then Events happened.  I was working as hard as before and suddenly the people that had been my good customers, people who referred others to me came to me for help refinancing their equipment or turning mostly paid off equipment. 

The phones stopped ringing and equipment piled up. Unsold equipment. They laid off 22 salesmen but kept me on at 1/2 pay.  At least for another year. 

When it finally came I was a little glad.  Money in the bank, modest lifestyle ( if work and then coming home to work on your house is a lifestyle. )  

it’s a decade later, I’ve moved on,  some of my dreams have ended. New ones begun life goes on .  

My point is that while the overall trend of the market has beaten inflation. Timing  of events beyond your control can prevent nearly anyone from capitalizing on the market or real estate.  

Then if you put it in a jar or under the mattress that money will slowly be damaged by inflation.  Paying off mortgages, debts etc. means loss of the potential income from investing. 

 I guess you pays your money and takes your chances.