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Participant ○○

Re: The Greatest Danger Investors Face

I think the greatest danger investors face (other than illness and accidents) is running out of money in retirement. That's one argument for annuitization, including Social Security as one source. Events (including accidents) and illness or frailty are other dangers. Unless one has a source of guaranteed income of some kind, stuff can happen that drives one into dependence and poverty.

My family has been lucky to have been forced to save in our pension plan. Although I did not annuitize my investments, contributing 15% of my gross salary every month from 1975 to 2014 to an investment plan (TIAA) provides me with solid retirement income via RMD's, combined with Social Security. (The 15% came from a combination of the employer's 10% contribution and withholding 5% from my monthly salary.)

There are other risks. One is disability. Although my wife and I benefit from excellent health care plans at my university -- along with Medicare -- we decided about 7 years ago to put money into Long-Term Care Insurance (LTCI). Long-term care is very expensive, and the insurance itself is costly, but to us it made sense even if we started the plan only shortly before I retired.

We also looked at LTCI as estate insurance, assuring that we would be unlikely to exhaust our estate because of the need for long-term care. Some of you know that we also inherited money at just about the time I retired. But that inheritance could be wiped out by just a few years of LTC expenditures. So we are putting some of our inheritance toward funding LTCI.

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Contributor ○

Re: The Greatest Danger Investors Face


@Bentley wrote:

Asking a simple question, "Where did you get the idea to buy KMI at $42?" is abusive?

Okie Dokie


I know nothing about KMI nor your alleged history of posting about it in the past. So if there is a history around this which causes others to take it as abusive, I am immune to such an effect. Yet it immediately struck me as a jab because of it not being previously mentioned, and no context was provided to frame the question as a genuine inquiry. I understand that you might actually have been asking an honest question with no jab intended, and all of us have it wrong, but when this many people including myself who has never known you to post about it before, take it as an offence to Intruder, you might want to give others input some consideration, given the alternative moderator intervention. The stubbornness of this forum's food fights amazes me sometimes. 

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Participant ○○

Re: The Greatest Danger Investors Face


@Learner wrote:

It has been slow here recently.  An article some of you might find useful:

https://awealthofcommonsense.com/2020/07/the-greatest-danger-investors-face/

 


There is a ton of research on this and the conclusion is overwhelming. You can't beat the market. Investors will always try, however, even if they are aware of this. Only a tiny percentage of fund managers beat their benchmark consistently. If the pros can't do it, retail investors have no chance and are only taken advantage of when they try. Having said that, I think behavior is changing and it has something to do with where we find ourselves today. We now face a potential crisis, the third in two decades. Each crisis lays the foundation for the next one and we can't seem to break the cycle. The uncertainty has forced investors to take on more risk, pushing them into a more speculative mode. Equally, markets have outdone themselves, leading many to believe they got it right. That over-confidence leads to over-trading and speculative bets. It is estimated that 85% of the market is trading activity.

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Participant ○

Re: The Greatest Danger Investors Face

Mortmain, I have no desire to argue, but I repeat my comment from my post in this thread yesterday: "I hear this over and over and over and .... "

Maybe after reading my post above you can clarify the difference in your mind between "market timing" and "cover your a*s" defensive selling.

IMHO, I read many market truism statements that many cling too and I think about somebody who writes a simple medical living will and then their survivors have to wade through and live with extremely diverse, subtle and painful consequences of simple statements about way too complex subjects.   :-)))

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Frequent Contributor

Re: The Greatest Danger Investors Face

If one looks at the June fund flows as posted at the Morningstar homepage, there's no evidence of retail investors taking on greater equity risk. To the contrary: domestic and international equity have been spurned.

Now there are those who regard fixed income as a loser's game--something I have heard for far too many years--but it's possible some of these folks don't quite appreciate that various plain vanilla fixed income funds have produced BOTH income and capital gains over the years including 2020.

I am and will remain a balanced portfolio guy leaning to the more conservative end of "balanced."

Bob

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Frequent Contributor

Re: The Greatest Danger Investors Face


@Mortmain wrote:

@Learner wrote:

It has been slow here recently.  An article some of you might find useful:

https://awealthofcommonsense.com/2020/07/the-greatest-danger-investors-face/

 


There is a ton of research on this and the conclusion is overwhelming. You can't beat the market. Investors will always try, however, even if they are aware of this. Only a tiny percentage of fund managers beat their benchmark consistently. If the pros can't do it, retail investors have no chance and are only taken advantage of when they try. Having said that, I think behavior is changing and it has something to do with where we find ourselves today. We now face a potential crisis, the third in two decades. Each crisis lays the foundation for the next one and we can't seem to break the cycle. The uncertainty has forced investors to take on more risk, pushing them into a more speculative mode. Equally, markets have outdone themselves, leading many to believe they got it right. That over-confidence leads to over-trading and speculative bets. It is estimated that 85% of the market is trading activity.


Just what do you define as the market which  cannot be  beaten? Is it the stock market, the bond market? The Dow industrials, SP500, SP 600, NASDAQ, the whilshire 5000, Russell 2000? Dow transportation Index? Please explain your Definition of the market and why it cannot be beaten.

Even assuming 85% of market activity is trading doesn’t mean that over the long term an investor cannot assemble a portfolio with above average tax efficient returns that requires little Trading. And what is wrong with trading? 90% of stocks are held by institutions who trade every day because that is why they exist. 35% of US stocks are held by foreign multinational and other investors. Every trading day at 4PM $Bs in stocks are bought or sold in order for mutual fund managers to make allocations of stocks/cash to the accounts of those customers  who have bought or sold shares of the fund during the trading session.

what risks have investors been forced to take on which pushes them into a more speculative mode? Please explain.

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Explorer ○○○

Re: The Greatest Danger Investors Face

Market has backstop of Central banks - remember 33% drop in Mar and Central bank announced unlimited support by making effective bond rate negative and increasing liquidity by buying all sort of assets. So don't be afraid, march on.

Everyone who says market can't be bitten, doesn't say this is because Central banks backstop in the last few years.

I really feel sad for all asset managers - they are fighting against a much bigger opponent - Central banks, biggest asset manipulator.

 

 

 

 

 

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Frequent Contributor

Re: The Greatest Danger Investors Face


@Kings60Man wrote:

Market has backstop of Central banks - remember 33% drop in Mar and Central bank announced unlimited support by making effective bond rate negative and increasing liquidity by buying all sort of assets. So don't be afraid, march on.

Everyone who says market can't be bitten, doesn't say this is because Central banks backstop in the last few years.

I really feel sad for all asset managers - they are fighting against a much bigger opponent - Central banks, biggest asset manipulator.

 

 

 

 

 


Why are asset managers fighting fed which has poured $3T into the economy and is buying corporate bonds to provide liquidity? My investment in fidelity large cap stocks is up 40% since I bought it in March.

 

 

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Contributor ○○○

Re: The Greatest Danger Investors Face

Of course it was a jab. How is a person to respond? "Guess I was just stupid that day."  Or "Go screw yourself." That is how food fights get started.


@archer wrote:

@Bentley wrote:

Asking a simple question, "Where did you get the idea to buy KMI at $42?" is abusive?

Okie Dokie


I know nothing about KMI nor your alleged history of posting about it in the past. So if there is a history around this which causes others to take it as abusive, I am immune to such an effect. Yet it immediately struck me as a jab because of it not being previously mentioned, and no context was provided to frame the question as a genuine inquiry. I understand that you might actually have been asking an honest question with no jab intended, and all of us have it wrong, but when this many people including myself who has never known you to post about it before, take it as an offence to Intruder, you might want to give others input some consideration, given the alternative moderator intervention. The stubbornness of this forum's food fights amazes me sometimes. 


 

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Explorer ○○○

Re: The Greatest Danger Investors Face

I think the greatest danger investors face is the unknown.

Lets assume the Investor is saving for retirement.

One danger is what the article learner  linked to says. I'll link it again for convenience

https://awealthofcommonsense.com/2020/07/the-greatest-danger-investors-face/

This is easy to avoid. Maybe! If you must have some play money, have some play money. But stick to your plan on your core investments. Don't play with money you can not afford to loose.

One big danger is unforeseen inflation. That is a problem with SPIA and SS. Our lifetime income might not be enough to be comfortable. So you hedge this by keeping some funds in something that might keep up with inflation (stocks, TIPS, and maybe real-estate).

There is the known danger of becoming disabled and needing long term care. I'm not sure how to deal with this one. My current plan is to use equity in our house. And money in our retirement accounts. Sorry kids. I looked at long term care insurance, to me that just seemed to add risk. The risk was we could not afford premiums just when we might need it.

I dropped disability and life insurance when I retired.

One big  danger for me is nearly all of my investments are with TIAA. I try not to worry about that. But it is a potential danger.

I think the linked article only addresses one of "The Greatest Danger Investors Face".

There are many other dangers, perhaps the biggest danger is one we have not thought about or considered yet.

Hmmm maybe I should consider having some of my retirement savings outside of TIAA. I like the simplicity of having just one provider to deal with. But maybe I should diversify. Any suggestions?

 

 

 

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Participant ○○○

Re: The Greatest Danger Investors Face

dk,

If TIAA is meeting your investment needs and if you are satisfied with TIAA, my thinking is you do not need to be concerned about it.

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Explorer ○○○

Re: The Greatest Danger Investors Face

One nice thing about TIAA is I'd have to jump through several  hoops to invest in KMI or enron, or any other single stock. I might have owned one, or both. I do not know. I prefer the basket approach. Do not put everything in one basket. I also like the bucket approach. Keep buckets of money invested based on when you might need that bucket. I'd like to have my baskets and buckets fuller. But I'm hoping they are full enough.

 

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Frequent Contributor

Re: The Greatest Danger Investors Face


@dknightd wrote:

I think the greatest danger investors face is the unknown.

Lets assume the Investor is saving for retirement.

One danger is what the article learner  linked to says. I'll link it again for convenience

https://awealthofcommonsense.com/2020/07/the-greatest-danger-investors-face/

This is easy to avoid. Maybe! If you must have some play money, have some play money. But stick to your plan on your core investments. Don't play with money you can not afford to loose.

One big danger is unforeseen inflation. That is a problem with SPIA and SS. Our lifetime income might not be enough to be comfortable. So you hedge this by keeping some funds in something that might keep up with inflation (stocks, TIPS, and maybe real-estate).

There is the known danger of becoming disabled and needing long term care. I'm not sure how to deal with this one. My current plan is to use equity in our house. And money in our retirement accounts. Sorry kids. I looked at long term care insurance, to me that just seemed to add risk. The risk was we could not afford premiums just when we might need it.

I dropped disability and life insurance when I retired.

One big  danger for me is nearly all of my investments are with TIAA. I try not to worry about that. But it is a potential danger.

I think the linked article only addresses one of "The Greatest Danger Investors Face".

There are many other dangers, perhaps the biggest danger is one we have not thought about or considered yet.

Hmmm maybe I should consider having some of my retirement savings outside of TIAA. I like the simplicity of having just one provider to deal with. But maybe I should diversify. Any suggestions?

 

 

 


All stocks are speculative at some point before they are considered to be acceptable investments. In 1976  AAPL began as a cheap way for individuals to hook into the the world of computers which was dominated by IBM. No one gave it a chance but Steve Jobs persisted until he was fired by John Scully the former CEO of Pepsi in 1985 who was clueless about what IT products consumers needed. AAPL almost filed for bankruptcy in 1993 and in 1996 managed to lose $1B on 7B in revenue. Jobs returned in 1997 turned it around with the iPhone, iTunes, IPod , MAC OS, the IMac which fueled AAPLs future growth. I came late to AAPL but have benefitted from owning it. Today AAPL market cap is $1.7T and generates $200B in annual earnings..

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Frequent Contributor

Re: The Greatest Danger Investors Face

David,

I have used TIAA for annuity income and Vanguard for unannuitized balances (lower costs, more appealing fund choices).

I'm a hands off low maintenance guy.

You might total up your investment costs and see how things stand. 

Bob 

 

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Participant ○○○

Re: The Greatest Danger Investors Face

For someone who wants to join M*, BasketsAndBuckets would make a good M* username.    :-)

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Participant ○○

Re: The Greatest Danger Investors Face

The greatest danger is FOMO. 

As earnings continue to nosedive and tech stock prices are bid up, some stare at their pile of cash (earning .01% MMKT interest) and start to waiver at the worst possible time.   

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Re: The Greatest Danger Investors Face


@jadster33 wrote:

The greatest danger is FOMO. 

As earnings continue to nosedive and tech stock prices are bid up, some stare at their pile of cash (earning .01% MMKT interest) and start to waiver at the worst possible time.   


Who is missing out? I started buying more equities on March 25 and haven’t stopped. My assets are at the level they were before the covid crash. My bet is that FAANG+M, recovery stocks, stay at home stocks, pharma and QQQ will continue to increase as the economy recovers over the long term. I have little invested in fixed income because yields will be below rate of inflation for the foreseeable future.

What are you invested in? TIPs?

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Re: The Greatest Danger Investors Face

Reminder:  The recent stock market low occurred on March 23, 2020.

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Re: The Greatest Danger Investors Face


@Learner wrote:

Reminder:  The recent stock market low occurred on March 23, 2020.

And the $2.5T economic recovery act became law on Mach 27 which is when the stock market began to climb.

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Participant ○○

Re: The Greatest Danger Investors Face


@Intruder wrote:

@jadster33 wrote:

The greatest danger is FOMO. 

As earnings continue to nosedive and tech stock prices are bid up, some stare at their pile of cash (earning .01% MMKT interest) and start to waiver at the worst possible time.   


Who is missing out? I started buying more equities on March 25 and haven’t stopped. My assets are at the level they were before the covid crash. My bet is that FAANG+M, recovery stocks, stay at home stocks, pharma and QQQ will continue to increase as the economy recovers over the long term. I have little invested in fixed income because yields will be below rate of inflation for the foreseeable future.

What are you invested in? TIPs?


So very sorry Intruder, how could I forget that all postings should keep you in mind.  You are the center of the universe.   This applies to nobody else.     You know it all.    Keep posting about your proud March purchases.   Never gets old.

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