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  • Generation X: Timing The Markets [View article]
    Much of the time period of your purchase timing backtest was very optimal for these timing strategies. There was major market volatility which provided multiple opportunities for each strategy to get invested. I'm sure you understand statistics and standard deviations. A multiple standard deviation event should be once per investing lifetime event, not a twice per decade event. In the forty years between 1973 through 2014, there were only five corrections of 20% or more. There were several more near misses in the 19% range. A 20% pullback scenario would have only had a few investment opportunities over several decades. Here is a graph showing these corrections.

    My strategy is to invest my money the day it becomes available regardless of the value of the market. When I was investing in individual stocks, I just chose the one that had the most favorable valuation on the day the money was available. Investing when you have the money probably makes more sense as your portfolio grows larger, when the new money is insignificant compared to the portfolio value.

    I was happy to see that you are only considering buy and hold timing, not buy and sell timing. Buy and sell timing will violate Warren Buffet's rule #1 - never lose money. I could see using a buy and hold timing strategy that would be expected to get the money invested at least quarterly. Such as putting in a limit order at 5% below the market or for the 50 day moving average price. These parameters would likely get your money invested frequently at a fair price.

    Overall, nice analysis. I enjoyed reading and contemplating your timing thoughts.
    May 13, 2015. 03:42 PM | Likes Like |Link to Comment
  • Generation X: Time To Plan Our Retirement [View article]
    2045: Glad to hear as a quant that you are studying the past for answers. And yes, the market does repeat, or better yet rhyme. In my 40 years of investing experience, future events are often similar to the past but never exactly the same. Therefore it rhymes. The second step to studying history is to study how you reacted in that history. In 2008, did you want to buy more stocks or sell what you had? I added to equities all the way down and held tight to them through the worst levels of the market. My first thought of selling equities was when my portfolio got back to even. That thought only lasted for a few months and I was back to 100% equities on the next market dip. My sell urge is on new highs and I want to buy more as markets go lower. Therefore my brain is wired to be 100% invested in equities.

    The major future influence in my plans are that bond yields cannot go much lower than what they are today. I believe the FED and policy makers will attempt to inflate their way out of the current debt levels. Therefore, I hold no bonds. I believe the 1960's through 1970's will look more like the future than the 1930's. I'm not concerned about demographics, technological change or inflation as I believe that holding equities will hedge out those issues. Therefore, my portfolio's biggest risk is that a deflationary scenario repeats. But I don't see deflation as an issue when the FED can just continue printing money.
    May 13, 2015. 01:37 PM | Likes Like |Link to Comment
  • Dividend Growth Investing Requires Perseverance [View article]
    Thanks Chowder for your reply. Like you, my goal in sharing my thoughts on SA is to help others make good financial decisions and, in doing so, improve my own financial decisions. I don't think investors can go too far wrong with either a well diversified dividend growth portfolio or a broad market index fund. Where investors can get into trouble with any investment method is if they concentrate their portfolio into too few stocks. As you stated in your reply, that is where I ended up because of my DGI criteria. Therefore, I had to make a change.

    What is important is that each investor have confidence in their investment plan and stick to it. Some would say I didn't stick to the DGI plan. But the market moved in a direction that no longer fit my plan and forced me into a concentrated portfolio. Therefore, I had to make a change in my plan.

    I know we agree more than we disagree. Like I said, just change the word "dividend growth" with "broad market" and the two plans are nearly identical. The S&P 500 index has a Chowder number above 12 with over 5 years of dividend growth. It fits the description of a Dividend Challenger. I am using the same principles as DGI but just using the broad market as my portfolio. As long as I persevere with this plan, it will be equally as successful as a well diversified DGI portfolio.
    May 13, 2015. 08:53 AM | 3 Likes Like |Link to Comment
  • Generation X: Time To Plan Our Retirement [View article]
    2045: I believe you are trying to find the answers to investing in the future rather than from within yourself. I believe "knowing thyself" is more important than any edge you may uncover about the future.

    I study the past more than I study the future. Most of my favorite investment books are from decades ago. I study how markets performed in the past to prepare myself for what may come in the future. Then I attempt to invest in a manner that I can comfortably hold if the future is anything like the worst of the past.

    That is what the FIREcalc site does. It compares your investment plans to the worst of the past to help you decide if you can be successful under the worst case scenarios. I strongly believe that by studying the past, then preparing a portfolio and a mindset that can handle the worst of the past, you will be more successful than trying to predict the future.

    I'm sure my favorite book "Winning the Loser's Game" states this more eloquently that I just did. But hopefully you get the point and are going to read that book to help you find the investing answers you are seeking from market history and from within yourself rather than from trying to predict the future.
    May 13, 2015. 07:57 AM | Likes Like |Link to Comment
  • Decision Made To Move From DGI To The S&P 500 Index [View instapost]
    BIB, my discomfort came from lack of diversification. How I got to 80% of my portfolio into just four stocks is because, as stated in "The Single Best Investment", the fewer stocks you hold, the higher their quality should be. Therefore, to hold a small basket of stocks (15-30) I feel they should be mostly AA rated and A rated at a minimum. I also wanted to hold stocks that were value priced relative to the market and had a dividend yield of 3%. As you can see in the article, when screening the market by those requirements, there were only a few stocks that qualified. In the past, I had dozens that qualified. Therefore, the market took away my diversification options within the DGI universe because of valuation. The valuation of the broad market, the S&P 500, was lower than the valuation of the Dividend Aristocrats and therefore it made sense to me to regain diversification by moving to the broad market.
    May 13, 2015. 06:35 AM | 1 Like Like |Link to Comment
  • Dividend Growth Investing Requires Perseverance [View article]
    Chowder, just replace "Dividend Growth" with "Broad Market" and our philosophies are the same. Focus on the long term. Focus on the dividend. Broad diversification . . . I love the book "The Single Best Investment" but also love the book "Winning the Loser's Game". I don't think these books are mutually exclusive. They agree more than they disagree. They both suggest 100% stocks, just one prefers high dividend payers and the other prefers broad diversification. I believe one can be successful with either method, but I prefer the current valuation of the broad market over the Dividend Aristocrats right now. Therefore, my decision was to move to the broader market index. I shared my thought process on this move in an Insta-blog for those who want to read more of my thoughts. Here
    May 12, 2015. 07:14 PM | 7 Likes Like |Link to Comment
  • Generation X: Time To Plan Our Retirement [View article]
    2045: We all have to play the hand we are dealt in the future and adjust for the results of our prior actions. You chose medical school and successfully graduated. Your future income should be relative to your investment. You have plenty of time. Just be careful to keep your lifestyle within reason while funding a saving and investing plan that will provide for your retirement.

    Go to the free "Firecalc" website and enter some saving/spending scenarios. Assuming $10k in current investments, saving $30,000 per year, spending $100,000 per year in retirement (today's dollars), and retiring in 2045 with 40 years of life in retirement, you would have been 100% successful based on 75 past market cycles for a 70 year experience. So if the future markets aren't any worse than the past, such as starting retirement the beginning year of the great depression or in 1960 when market returns fell drastically in inflation adjusted terms, you will be successful if you can save $30,000 per year. Its definitely not too late. I'm sure a medical doctor can find a way to save at least $30,000 per year and still live an above average life. This assumes staying 100% invested in the broad U.S. stock market.

    You still have the time to fund a great retirement. Depending how hard you save and invest, you could still retire early. Just make your plan and live by it. But don't forget to enjoy the journey as much as the expected destination. Live in a nice neighborhood, drive nice cars, pay for your kids college educations, have some nice toys, and don't be cheap on your children's weddings . . . you can afford all of these things and still fund your retirement. Now go put together a plan and enjoy the journey!
    May 12, 2015. 11:45 AM | 2 Likes Like |Link to Comment
  • Generation X: Time To Plan Our Retirement [View article]
    Here is a link to Charles Ellis' investment advice letter to his Grandchildren:
    May 11, 2015. 04:45 PM | 1 Like Like |Link to Comment
  • Generation X: Time To Plan Our Retirement [View article]
    Here is a link to Charles Ellis' investment advice letter to his Grandchildren:
    May 11, 2015. 04:42 PM | 1 Like Like |Link to Comment
  • Generation X: Time To Plan Our Retirement [View article]
    2045 Retire: "There are also lots of very knowledgeable contributors here on SA who have education and experience far surpassing my own. Please help me through the comments!"

    Advice to generic 2045 Retirees:

    Here is the advice from a financial analyst who retired at 52 while making far less than most throughout his career. 1) Read the book "Winning the Loser's Game" by Charles Ellis. 2) Read it again and again. 3) Follow Ellis' advice and place 100% of your investments into a low-cost broad market equity index fund, such as VT, VTI or SCHB. Invest the money when it becomes available, regardless of the level of the market. Do not time the market. Follow this plan while saving aggressively and you can retire when your dividends from the broad market index exceed your living expenses. The more frugally you live and the more aggressively you save, the sooner you will be able to retire.

    I wasn't smart enough to follow the above plan. I complicated investing far more as evidenced by my SA comments. I had to try all manners of active investing and timing the market. In hindsight, broad market indexing would have been much easier and more successful than all the other investment plans I attempted.

    I had a rich old guy share this same advice with me early in my career. I wasn't smart enough to follow it and you probably won't be either. We all think we are smarter than the market. But hopefully you are smarter than I and will consider this advice. If you do, you will save yourself all the time, energy, and expense of attempting to outsmart the market.

    I am certain you will be successful in any plan you choose. But hit the EASY BUTTON and invest in a broad market index. You'll be delighted with your results.

    Good Luck!
    May 11, 2015. 04:30 PM | 2 Likes Like |Link to Comment
  • Replace The 4% Retirement Rule With These 4% Dividend Stocks [View article]
    That work took me a whole 5 minutes at the most. As I have been stating over and over . . . go try out the Firecalc retirement calculator. It is an amazing free resource. I have no affiliation to that website.
    Apr 24, 2015. 08:35 AM | 2 Likes Like |Link to Comment
  • Replace The 4% Retirement Rule With These 4% Dividend Stocks [View article]
    Paul, first let me say that I respect and value your opinions and know we agree more than we disagree. But I would like to challenge your below comment with the facts.

    Paul stated: "I have been living solely off my hand-picked investments for 18 years now (since 1997) and I would have been back to work long ago if I had been invested in an index fund."

    So I calculated the 4% rule based on your retirement date to test this assumption. Running these assumption through FIREcalc, assuming a $1 million dollar beginning portfolio, 4% initial withdrawal increased by the rate of inflation, 75% equities and 25% bonds. Here are the portfolio balances from 1997 through 2014:


    Here are the withdrawals:

    Therefore, the 4% rule would have worked perfectly for your retirement timeframe. You started with $1 million and would have $1,498,533 left after 17 years. In inflation adjusted terms, your portfolio value would be $1,019,241. That doesn't sound like you'd have to go back to work to me. If you invested 100% in equities, your spending would have been the same and your portfolio balances would be $1,588,369 or $1,080,343 inflation adjusted.

    Now I know your spending may have been different to match your comment. If you spent more than 4% per year . . . Like I stated earlier, no disrespect intended, this discussion is about the 4% rule and the rule would have worked admirably for your retirement period. And I would add that 1997 until today would have included some fairly rough periods including the crashes in 2000 and 2008.
    Apr 24, 2015. 08:16 AM | 6 Likes Like |Link to Comment
  • Replace The 4% Retirement Rule With These 4% Dividend Stocks [View article]
    Paul, I wouldn't mind being an "average" driver if 90% of my peers were the professional NASCAR and Indy drivers. I wouldn't mind being an average tennis player if 90% of the group were professional tennis players. When you invest in the stock market, greater than 90% of transactions are being executed by Wall Street professionals. Do you really think an individual can out-analyze and out-trade the brightest on Wall Street? The professional traders that move their offices next door to the exchange computers to get a micro-second advantage? The index is the consensus thinking of all the active professionals on Wall Street. The only way to beat them is to take the non-consensus side of the trade and be right more often than you are wrong. Do you really think you can do that? I've tracked my active trading performance against the broad market index and am not ashamed to say that I have underperformed. Therefore, I've decided to take the index average in the future.
    Apr 23, 2015. 04:10 PM | 4 Likes Like |Link to Comment
  • Replace The 4% Retirement Rule With These 4% Dividend Stocks [View article]

    I will quote my new favorite book "Winning The Loser's Game" by Charles Ellis. "Income requirements are excluded from this discussion of investment policy because the rate of return for an investment portfolio cannot be increased just because you want more money to spend. Beware a subtle danger: An investor can almost always produce more income from a portfolio by investing more and more heavily in income stocks. But other investors are rational, and they’ll let you get more today only if they can expect more tomorrow. So part of what appears to be high current income is really a return of capital."

    Therefore, be careful in reaching too far for yield. There is a balance between yield and growth. Moving too far in either direction can get you in trouble. Growth stocks can't continue to grow at 30% rates for long the same as dividend stocks can't continue to pay significantly above market rates without giving up future growth. I've always lost money when I began to chase yield. So be careful!
    Apr 23, 2015. 03:22 PM | 4 Likes Like |Link to Comment
  • Replace The 4% Retirement Rule With These 4% Dividend Stocks [View article]
    Thank you Dave, I'll take a 9.5. Seriously though, I hope I bring logic and facts into the mud throwing. (Sometimes its fun to play in the mud.) I agree that the 4% rule is broken with ZIRP, therefore, I hold no bonds. I'm 100% in SCHB right now, thanks to your prior comment to me, and I'm also considering SCHF based on your prior comment. I believe a 50/50 SCHB/SCHF with an equal dividend yield as the Dividend Aristocrats is something to think about for DGI investors. Use all of the dividend growth thinking . . . live on the dividend, who cares about the principle balance, but spread your portfolio out over thousands of stocks. Combining DGI thinking and index investing with the SCHB/SCHF may be a winning combination for retirees in this ZIRP environment. That's where I'm headed, but as you said above, "we shall see".

    P.S. Based on Firecalc, the historical 100% safe withdrawal rate for a 100% U.S broad market portfolio is 2.7%. The 4% withdrawal rate had a 93% chance of survival. Those are the facts around this discussion.

    P.P.S. I've been 100% invested in stocks since the crash levels of 2008, not from just a few weeks ago. I would not suggest that others seriously increase their stock levels at today's record highs.
    Apr 23, 2015. 02:39 PM | Likes Like |Link to Comment