The_Munchmaster Posted February 13, 2007 Report Share Posted February 13, 2007 If I was in your position but older, say 60 or 65, and I was retiring with $500,000, or the equivalent at the time, I would perhaps look at my life expectancy and consider not just living off the interest but also eating into the principal each year. After all if you have no dependants, there is no point leaving your principal behind when you depart. Risky perhaps, but worth considering. Link to comment Share on other sites More sharing options...
junglesoup Posted February 13, 2007 Report Share Posted February 13, 2007 I will not confuse you with Warren Buffet... With a negative attitude towards the market (a crash is coming vs the thinking of periodic market adjustments), it is best for that person to stay out of the market altogether. They will always blame the market and poor timing of the market for their losses. The market is not about timing and trying to chase upward swings...... CB I m not being negative about markets. I m being realistic. You state that the market is not about timing. I could demonstrate to you that the market is very much about timing. If you take a 12 month rolling period, or a 36 month rolling period you will find that these people who invested in the market at different points will have a very different balance sheet at the end the rolling period. Why? Because of the time when they went into the market...even if its only by a difference of a few months. I give the most recent example of this. If I invested in the Footse 100 in April 2006 and someone else invested in at the end of June do you think we would have identical gains? No what would really have happened is that that the person who went in during april would have suffered a drawdown of about 10% percent of their capital. The investor who went a few months later would have would be now enjoying a 10 percent gain. Thats a Delta of 20%. Thats a small example. However there are countless over decades and even centuries of stockmarket prices that investing at different times will produce very dramtic differences in capital gains. Again imagine the investor who put all his money into the western market indices in 2000. He would not even have gained back his originally investment now still 7 years later. However the investor who went in 2003 would be up 50 percent. How can you possibly say that markets are'nt about timing? A more extreme example would be someone who invested in Nikkei 225 during the early 1990's. Now in 2007 they would still be way below the value of their original investment. 15 long years, to still be below 0% gains, and inflation running at 2-3% a year and your capital doin nothing. The type of investment which you are talking about pertains to BUY and HOLD. However if your timing is wrong then you will be BUYIng and still HOLDING HOlding until your grave. The type of investment I m talking about has the ability to go short as well as long. Not buy and hold. When the market is down we go short, when its up we go long. None of this wait and hope. Surely the experts must Know? Its been shown that investing your money with a money manager, Goldmann, Merril Lynch does mean they really know how to invest. In 1999, research has shown that the financial advisers, stockbrokers from Merril Lynch when calling customers to recommended stocks, that 99.4% of their calls were BUY recommendations. What happened? The herd mentality is dangerous. Have a read through this link... Link this is the style of trading that I ve learned and use. Its not investment but trading. It has superior gains over 20 years. It has no correlation with the markets. Infact when the markets were down 20%, Dunn Capital Management was up 94% in the same period. The great mathematician Mandlebrot also has done tireless research into the nature of markets. He has systematically shown that markets are much more risky than people believe. yes even the experts. Investors are using methods that dont really work in the long run. They fall short during times of market turbulence. Their methods are based on standard deviation models, such as the Black-Scholes option pricing model. Remember these guys from Long Term Capital Mangement. Well they went in over lerveraged and then Russia defaulted. They lost billions of peoples money and their own. The price didnt return to the mean quick enough, so they got stung big time. Barings Bank October 1987 Asian Crisis and many more recent exmaples show that the models they use for pricing arent sufficient. Read Mandlebrots book Misbehaviour of markets to see where the bell curve method increses your risk not decreases it. FT gave this finance book of the year so it warrants some reading. CB, you call it negative to think crash v market adjustment. Name it whatever euphemism you like, 3rd wave elliotwave correction market adjustment, crash downturn...up to you. The fact remains that they are forms of crashes. All markets have them(bubbles) I m not being negative, just realise the reality. Yes of course people have made money by buy and hold , however alot of people have lost money also. Just depends on your timing, which is sad but true. Crashes are also becoming more prevalent for certain reasons. And we will see again massive amounts of money being wiped of assets, stocks etc Of course someone will be making this money in this 0 sum game. The question is not if but when. So when you say when someone with a negative attude should stay out of the market I will clarify what I mean... I get in and out all the time. I dont get in and stay in...Sometimes I can be in for a day, other times I can be in for 2/3weeks. Cut your losses and ride your gains... Link to comment Share on other sites More sharing options...
cardinalblue Posted February 22, 2007 Report Share Posted February 22, 2007 I am not going to discount what you say about financial matters though it is ironic that you tell the original investor to ignore other board members but why not you then? Are you not the defintion of a day trader? Sounds like one of the very few successful ones vs the now extint version of the 1990's... I think you have to keep in mind the poster is looking to invest and protect his money without trying to become a full-time expert in the field. He is not a candidate to become a full-time expert in financial investments.... He just wants to protect his money first and would like to do some growth to it so he could improve his financial standing. Everyone will do their own thing so it would be silly to say this strategy or that one is better or worse for that investor... Unless he really going to get serious about investing, he should stay risk adverse or low risk with some diversification (stocks, bonds, real estate, etc) to keep up with inflation, some growth and leave it at that... I wonder how you feel about a guy (not me - too bad) who was 68 years old in 1988 when he took $200,000 and invested in a company that went public that same year. Today at the age of 87 he has 3 million shares of that company with a price stock over $21. He followed the buy and hold strategy and buy some more via dollar cost averaging... Is that financial suicide in your defination? There are many ways to increase net worth so there is not full-proof better methods than others. Yes, some are muchr riskier as it that same investor put his money in worldcom or one of the failed dot com companies of the 90's he would have a far different story to tell. There will be success and failure abound in all methods of investing.... There is not a right or wrong way to advise this guy. He needs to define his own objectives, his short-term and long-term expenses, lifestyle wants, and be fully aware of what the risks are for whatever type of investment he chooses... Bond investments will work for some but not others; day trading works for some but not others, buy and hold works for some and not others, buying real estate works for some but not others... He needs to define what he is comfortable doing with his money and leave it at that. There is no magic fomrmula or full-proof advice that can be given to "how should i invest my $$$?" CB Link to comment Share on other sites More sharing options...
Denarius Posted February 22, 2007 Report Share Posted February 22, 2007 There is no magic fomrmula or full-proof advice that can be given to "how should i invest my $$$?" CB I have magic formula. But I'm not telling. Link to comment Share on other sites More sharing options...
cardinalblue Posted February 22, 2007 Report Share Posted February 22, 2007 So you are the author of the book, "the number" It's a good read but you talk about everything except that magical number. Glad you emphasize process over some finate number which we all know there is none other than higher provides greater psycholoigcal comforting but then the rich guy swimming in $$$ tries his hand at his new toy, hang-gliding, and gets killed. Thank God he left a will and then the relatives, his ala mater and the anna nicole smith's of the world can battle it out in court... CB Link to comment Share on other sites More sharing options...
JaiGuruDev Posted March 19, 2007 Report Share Posted March 19, 2007 my analist says... I think you got the numbers wrong... I believe the rule of thumb is that the magic number is 300 times your monthly budget (and donâ??t forget to take taxes into consideration). Take that money and invest it in a balanced portfolio, and it'll average a return of around 7 1/2% a year. Each year, you can spend 4% of your portfolio, and leave 3 1/2% invested to account for inflation. I've run this through millions of Monte Carlo iterations myself, and the results look very promising. Theoretically, the accounts should adjust for inflation, and youâ??ll leave your heirs a lovely big inheritance. For more information, Google FireCalc. If youâ??re not interested in leaving anything behind, check out the IRS Life Expectancy tables, and withdraw the reciprocal of the years you have left; the magic number is still the same (300 times budget). You should do pretty well as long as you donâ??t live to 100 (a nice SSA payment would just be gravy). Link to comment Share on other sites More sharing options...
JaiGuruDev Posted March 19, 2007 Report Share Posted March 19, 2007 I wonder how you feel about a guy (not me - too bad) who was 68 years old in 1988 when he took $200,000 and invested in a company that went public that same year. Today at the age of 87 he has 3 million shares of that company with a price stock over $21. I would feel he's lucky; for every guy like that, there's a gazillion that lose, and some lose everything. Additionally, I'd say he's not an investor; he's a speculator. Is that financial suicide in your defination? It's certainly my definition of attempted financial suicide. I know a guy that won the lottery. Just because *he* got lucky, is that the way everyone should plan for their retirement? Link to comment Share on other sites More sharing options...
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