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Investing and Personal Finance

 
 
 
I've made money in the stock market too. We women tend to be very cautious investors. I talked my husband into dumping 80% of our stocks two weeks ago, just a few days before this crazy volatility. I saw a bubble forming. I've lived through a few bubbles, and we are too old to take large risks. I only buy stocks when there's a huge correction or after stocks have bottomed out during a recession. Considering that Trump is president, I'm sort of scared of getting back in right now. I'm going to wait and see what happens to interest rates for awhile.
 
southernhybrid said:
You've been given some good advice, but I wanted to add a word about paying off a mortgage early. It may not be the best thing to do investment wise, but as one who chose to pay her mortgage off about ten years early, I can only say that the emotional satisfaction of knowing that you will always have a roof over your head is well worth any possible missed investment returns. I had to talk my husband into it, but he has thanked me time and time again. We live in a very low tax area so we won't have any problems paying our taxes despite now living on retirement savings and SS. I know too many people that are in their 50s and 60s that still have many years left on their mortgages, including one of my own sisters. I enjoy the security we have without a mortgage to worry about.
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That's definitely something I've considered and that's important to me.

Right now I'm working towards building what The Intelligent Asset Allocator called a 'Portfolio Policy', although the book never mentions doing things like working a mortgage into the policy. But essentially I want to determine how much risk I want to take on, and get an idea of our retirement income given a number of scenarios.

The good news is that right now I'm a part of the Ontario healthcare pension, which is an incredibly strong pension. If I theoretically finish my career with my current employer I'll be getting monthly payments to the tune of 3k/month, in addition to the Canadian Pension Plan and any savings. So prospects are already looking pretty good, but I'm well aware that a lot can happen over the course of (now) 28 years and so I need contingency planning.

I'm also leery about what you mentioned in another post, that with the way the U.S. is going right now stocks may not be the wisest decision. All of these books talk about 'risk', and yet I wonder what the 'risk' is when mathematically we're supposedly going to see perpetual growth over the long-term. Now with environmental degradation, automation, political uncertainty, and so on.. I wonder how strong this 'perpetual growth machine' really is.
 
I share your concerns. I'd rather sit on the sidelines for awhile and see what happens. Of course, I'm much older than you so I can't afford to risk as much money as a younger person can. In times like these, I prefer security over risk.
 
rousseau said:
southernhybrid said:
You've been given some good advice, but I wanted to add a word about paying off a mortgage early. It may not be the best thing to do investment wise, but as one who chose to pay her mortgage off about ten years early, I can only say that the emotional satisfaction of knowing that you will always have a roof over your head is well worth any possible missed investment returns. I had to talk my husband into it, but he has thanked me time and time again. We live in a very low tax area so we won't have any problems paying our taxes despite now living on retirement savings and SS. I know too many people that are in their 50s and 60s that still have many years left on their mortgages, including one of my own sisters. I enjoy the security we have without a mortgage to worry about.
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That's definitely something I've considered and that's important to me.

Right now I'm working towards building what The Intelligent Asset Allocator called a 'Portfolio Policy', although the book never mentions doing things like working a mortgage into the policy. But essentially I want to determine how much risk I want to take on, and get an idea of our retirement income given a number of scenarios.

The good news is that right now I'm a part of the Ontario healthcare pension, which is an incredibly strong pension. If I theoretically finish my career with my current employer I'll be getting monthly payments to the tune of 3k/month, in addition to the Canadian Pension Plan and any savings. So prospects are already looking pretty good, but I'm well aware that a lot can happen over the course of (now) 28 years and so I need contingency planning.

I'm also leery about what you mentioned in another post, that with the way the U.S. is going right now stocks may not be the wisest decision. All of these books talk about 'risk', and yet I wonder what the 'risk' is when mathematically we're supposedly going to see perpetual growth over the long-term.
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Yes, the US and even other markets have been on a tear, never mind the about 9 years of markets going mostly up. Even a 20% plus pull back over this year, is quite plausible. However, as you are not an older fart like myself, I suspect you don't have a couple hundred thousand sitting under your mattress with an itch to go somewhere else. If you are thinking of doing some sort of monthly contribution to an investment account, the cost averaging should very quickly subsume the fears of losing some percentages. When my parents died in 2016, I got some more money to invest, and yeah it was frustrating for me to decide how much to put into things like the 10x10 I mentioned. If I had dumped it all in (which I didn't), I would be way ahead even today 2/12/2017. FWIW, it took me a long time to un-learn my dad's ever present, 'things could go wrong real bad, cuz <fill in the blank boogieman event>'. All it taught me is how much further ahead I would have been if I had ignored my dad's continual fearful advise. It made it harder that my dad had a business degree and was in banking all his life. Me, an engineer and then in IT, so he should know more, right? In my dad's defense, I should say he somewhat grew up in the depression.

With all that said, you can also always go for some sort of 50/50 split of safer and then some broad equity fund. I don't know much of anything about how taxes work for you in Canada, but as I am in a higher income tax US state, I get an advantage of having a portion in a Oregon based bond fund (LMOOX) with current tax free (state & federal) yield of 3.41% (a bit of irony: the first CD I ever had earned 14.75%). It has about 44 different bond holdings in my state. Even 1 or 3 crashing wouldn't be a disaster. Now if I lived in Illinois or Puerto Rico, I might be more concerned about solvency things.

Now with environmental degradation,
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Compared to what we had to dig out of from after WWII thru the 1960's? Of course global warming could easily be messier...

automation,
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This only increases the value of capital compared to labor. Nothing for money to fear here.

political uncertainty,
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Compared to what? FFvC won't destroy America as we know it. We are no longer teaching kids in the US to hid under their desk just in case the USSR launches a nuclear attack...

and so on.. I wonder how strong this 'perpetual growth machine' really is.
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Just realize that there is no 'perpetual growth machine'. And I thought I was pessimistic...

But no matter what you choose to do, you alone, have to be comfortable with it. Anywho, that is my wooden nickle.
 
I just thought I'd add on the pessimistic side...

I have periodically read this guys (Doug Noland) commentary for a number of years for 2 reasons. One, I try to read a range of views, and not just ones that I agree with. Second, I am still not fully convinced that the recovery from 2008/9, largely thru what I see as massive international central bank intervention, as no-side-affects free ice cream (trillions of currency created). Part of the problem in economics IMPOV, is that we (laypeople) like things in neat packages, with simple defined cause-effect boundaries, and we like the flows and ebbs to play out much faster than they tend to actually do so. So Doug Noland:
http://creditbubblebulletin.blogspot.com/p/credit-bubble-bulletin.html

And a good article on recent volatility (VIX; XIV), and some of the games people were playing that I want nothing to do with:
https://www.barrons.com/articles/where-volatility-goes-to-die-1518237491

On another side, I find Barry Eichengreen to be a very interesting economist to read (I don't really care mcuh for the famous Krugman).
https://www.project-syndicate.org/c...-of-black-monday-by-barry-eichengreen-2018-02
 
funinspace said:
I just thought I'd add on the pessimistic side...

I have periodically read this guys (Doug Noland) commentary for a number of years for 2 reasons. One, I try to read a range of views, and not just ones that I agree with. Second, I am still not fully convinced that the recovery from 2008/9, largely thru what I see as massive international central bank intervention, as no-side-affects free ice cream (trillions of currency created). Part of the problem in economics IMPOV, is that we (laypeople) like things in neat packages, with simple defined cause-effect boundaries, and we like the flows and ebbs to play out much faster than they tend to actually do so. So Doug Noland:
http://creditbubblebulletin.blogspot.com/p/credit-bubble-bulletin.html

And a good article on recent volatility (VIX; XIV), and some of the games people were playing that I want nothing to do with:
https://www.barrons.com/articles/where-volatility-goes-to-die-1518237491

On another side, I find Barry Eichengreen to be a very interesting economist to read (I don't really care mcuh for the famous Krugman).
https://www.project-syndicate.org/c...-of-black-monday-by-barry-eichengreen-2018-02
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Thanks, those look interesting.

I toyed with the idea of selling some puts to take advantage of increased volatility and premiums, but decided against it. Ended up buying some more stock instead, which I guess is still optimistic. We'll see how it goes...

In the meantime, I'm again facing the decision of whether or not to take a 10-year vesting pension over a matched 403b-equivalent. My calculations indicate that the defined contribution is probably better in the short term, while the defined benefit plan is better for the long term. Also, a pension is nice in that I don't take on the investment risk, which would be a good way to diversify from my other savings. Of course, CT's pension program is horrifically underfunded, but I'm not quite sure how risky that makes it on the recipient end. Blerg. Time to make some more charts.
 
Re-balanced my parents' retirement portfolios today. Here's the approximate breakdown:

US Stock: 35%
Int'l Stock: 8%
US Bond: 33%
Int'l Bond: 8%
US REIT: 6%
Int'l REIT: 2%
Commodities: 5%
Cash: 3%
 
While the finance thread is in view and I just finished booking a 9-day Mediterranean cruise, here is some good advice I just made use of (can't remember if it was from The Intelligent Investor or The Intelligent Asset Allocator):

Would you rather be a very rich eighty year old who can't get out of the house, or strolling the streets of paris as a young man
 
Nice sentiment.

Of course, the pessimist in me will say that neither is possible, that I'll be a barely-breaking-even eighty-year-old who never could afford to go to Paris.

Even worse, I might end up the guy who strolled the streets of Paris as a young man, and as a direct result of that, became the eighty-year-old who had to keep working until they found him dead at his post.
 
James Brown said:
Nice sentiment.

Of course, the pessimist in me will say that neither is possible, that I'll be a barely-breaking-even eighty-year-old who never could afford to go to Paris.
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You could replace Paris with anything meaningful to you that fits your budget.

Even worse, I might end up the guy who strolled the streets of Paris as a young man, and as a direct result of that, became the eighty-year-old who had to keep working until they found him dead at his post.
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In my view there's a middle ground there, between spending too much and spending too little. The over-arching point, I think, is that if you're lucky enough to have any excess cash, it's worthwhile to try to enjoy it sometimes, rather than being too focused on the security of your future.
 
rousseau said:
In my view there's a middle ground there, between spending too much and spending too little. The over-arching point, I think, is that if you're lucky enough to have any excess cash, it's worthwhile to try to enjoy it sometimes, rather than being too focused on the security of your future.
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Oh sure, I agree. Balance is best. The problem for me is maintaining that proper balance. How much spending on myself is too much? Too little? What if my wife and I disagree about where that sweet spot is? What will I regret more when I'm old and it's too late: that I spent too much on frivolities? Or that I didn't enjoy life while I was young enough to enjoy it?

Sometimes the answers to those questions change from day to day.

But this is a thread about investing. One plan I recommend to beginners is the Couch Potato portfolio, created by Scott Burns. 50% stocks, 50% fixed income, rebalance once per year. You'll spend ten minutes a year thinking about your long-term investments. You'll still beat a majority of managed index funds, but with far less stress.
 
Almost a year later, wedding paid for and starting to build savings. Also a bit deeper into my study of investment theory and counter-intuitively I'm getting less sure of a path forward as time goes by. I think that's a good thing, though.

Currently reading this which is quite good, and gives the impression that stocks are unlikely to be a good investment over the next 10 - 20 years. So these days I'm starting to seriously consider safe securities or fast-tracking my mortgage and being done with it. Either way we have negligible liquid savings at this point, so I have time to make decisions.
 
Before even THINKING about investing in anything, first eliminate your debt.
Think of it like this... would you prefer to be guaranteed to save 10% of your income, or have the CHANCE to either lose 10% or gain 10%?
Take the guaranteed path to having more money by paying off your car, making extra mortgage payments to lower your overall interest costs, pay off your credit cards....
People who buy stock or other financial instruments while holding on to thousands of dollars a year of debt are just working hard to maybe keep their heads above water... or not.
 
Gun Nut said:
Before even THINKING about investing in anything, first eliminate your debt.
Think of it like this... would you prefer to be guaranteed to save 10% of your income, or have the CHANCE to either lose 10% or gain 10%?
Take the guaranteed path to having more money by paying off your car, making extra mortgage payments to lower your overall interest costs, pay off your credit cards....
People who buy stock or other financial instruments while holding on to thousands of dollars a year of debt are just working hard to maybe keep their heads above water... or not.
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Why would I do that? I can earn 7 percent on money I invest now over the long run (adjusted for inflation) and only have to pay 6 percent for my debt (not adjusted for inflation) for another 3 years.
 
Yea I think the question is whether your investment profits will outstrip your mortgage interest savings. Thing is, the more I read the more it looks like I actually won't be able to earn much more with stocks over the next 15-20 years. All outlooks I've read are bleak.

So it's earn a sure 2.85 on my mortgage, or maybe or maybe not earn a bit more than that with a diversified portfolio. For now I'm just accumulating cash until I'm more sure what I want to do with it.

ETA: The other thing I'm considering is liquidity. I could easily pay off my mortgage in about 10 years, but that leaves me with little cash at that time if stock conditions do become favourable.
 
J842P said:
Why would I do that? I can earn 7 percent on money I invest now over the long run (adjusted for inflation) and only have to pay 6 percent for my debt (not adjusted for inflation) for another 3 years.
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7% after inflation long term? How?
 
rousseau said:
Yea I think the question is whether your investment profits will outstrip your mortgage interest savings. Thing is, the more I read the more it looks like I actually won't be able to earn much more with stocks over the next 15-20 years. All outlooks I've read are bleak.

So it's earn a sure 2.85 on my mortgage, or maybe or maybe not earn a bit more than that with a diversified portfolio. For now I'm just accumulating cash until I'm more sure what I want to do with it.

ETA: The other thing I'm considering is liquidity. I could easily pay off my mortgage in about 10 years, but that leaves me with little cash at that time if stock conditions do become favourable.
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What does your wife think about all of this?
 
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