Your social security or other pension will go further. Hi Jerry, you might want to dig into the Betterment article I linked to if you’re into the details. But most people freak out, and there’s a vague sense of tension in the air until she realizes that I’m not one of those people.

They need to be watched very closely, which I’m not a fan of, but for someone who both knows and follows the market very well, they can be used with reason and judiciousness. When you take the cyclically adjusted value of the market in aggregate It happens every time. Almost everyone who takes a reasoned, value-based approach was able to do this. Unfortunately, we’re a fairly small portion of the investing public, but we shouldn’t be. While the Efficient Markets hypothesis is definitely correct to some degree, there are limits to it. And at its best, it is only true from the macro perspective.

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They lay eggs called “dividends”, which are real money that can either flow automatically into your checking account, or automatically reinvest itself to buy still more stocks. Some younger companies don’t pay dividends, but that doesn’t mean they aren’t making you money – they are just reinvesting their profits to grow even faster – and eventually become a Super Hen. I know I’m looking at the short term here, but I don’t foresee much growth in the stock market for the next few years. I’m still investing in the market, but I’m keeping a little more cash on the sidelines as well as buying real estate as a hedge to my opinions about the economy the next few years. I’m not even certain taking a snapshot of assets at retirement is a good idea.

This is especially true of the mutual fund industry, and is also true of the hedge fund industry, though to a slightly lesser extent. And that’s is why an even greater percentage of mutual funds underperform than do hedge funds. This is the exact topic he won his Nobel for, and it does hold up to scrutiny. The very metric that you are basing your whole market analysis on is quantifiably unreliable.

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And yet, he speaks out against the idea of market “timing” whenever he can. Right now, stocks are priced very high by any reasonable valuation. You might have no need to sell them if you bought them for fair prices and plan on holding them for many years. But one would be foolish, in my opinion, to be a buyer of them right now. The record of history is just too clear to warrant that.

Regardless of the fact that the market does this, and you shouldn’t be scared by it, you have to also take into account that there is some luck involved in the year you decide to retire. You can do nothing and end up better than people who do something. And have less stress and more money at the end of the day. To complicate the the theory more, arguably, we don’t even really have much of a true “market” in finance in the US.

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Long time reader and advocate for your brand of lifestyle and philosophy . You admit that you retired in 2011, and the market has gone up a good bit since. That has a huge affect on how much easier it is to handle these down times.

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It’s very satisfying to have your money pay you. And when the stock price drops, to be able to buy more to pay you more. It’s very easy to hang onto a stock that actually pays you now and then. The issue is skill takes a long time to show and it’s hard to tell luck apart from skill. Many people believe they have the intellectual and emotional capacity to beat the market and they try to pick out individual stocks. Chances are they are not as capable as they think and they will only learn this lesson a couple decades too late.

  • Currently they’re trading in excess of that.
  • Bringing in even $10k/year (of the $40k MMM talks about above) would bring you down to a 3% withdrawal rate.
  • I agree with you on the individual stock idea.
  • They would produce an initial ~13% income tax but when you consider the generous children’s money that is nearly zeroed out.
  • So just looking at the portfolio page without reading the corresponding posts is something I do not recommend.

Timothy says this would be bad if we ended up in a market that looks like the Japanese stock market of the last twenty years. What defines a good stock can take time to learn on your own even with all the great information out there. Even professionals in the space mess this up constantly. Plenty of people have no idea how to analyze stocks including those with accounting or finance degrees. It’s a lot of work that takes time to master and learn.


I’m going to be a little cautious with stocks and seek other investment opportunities with a ROI around 10-15%. Finding your site has helped me greatly with my savings rate. From the time I graduated up until a few of years ago, I was troubled by all the extra cash left over from my paycheck. I was used to a fairly modest lifestyle during my studying years but after graduation suddenly felt pressure to “update” my life, including wardrobe, food, hobbies, all of the usual crap. Living with a man who was very spendy didn’t help, either. I really wanted to save but didn’t know how.

Why would stocks be the only thing in which a buyer completely ignores price ? People used to say this about housing or the Japanese stock market – “it will always make money over a long period of time”. The fact is any investment comes down to expected future cash flows – right now the 10-yr expected return on equities in the US is not fantastic if one uses prior history as a guide. Stocks might certainly continue their climb, but there’s less reason for me to believe so these days.

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I was interested and skeptical, and ultimately decided not to use Betterment because it seems like a lot of marketing and not a lot of substance. In general, you never cash out gains finexo avis as a way of trying to outsmart the market – you just pull money out as you need it. Another great question I should write about in a “How to live off a fixed chunk of money” article.

That makes it quite hard to believe a 4% withdrawal would be possible. 10% down is nothing to write home about but recessions usually let stocks drop by 35% fp markets review to 55% . Of course, we do not know when such a drawdown strikes but it is fairly certain that we will experience an episode like this in the next 20 years.


I said in my post that my portfolio does not go up as much as the averages during booms. If MMM or any other person that talks about investing in a good S&P mutual with low fees is only half right then I’m going to be quite comfortable when my early retirement finally arrives. By taking SS early, you spread your SS income over more years and lower your tax liability. Bringing in even $10k/year (of the $40k MMM talks about above) would bring you down to a 3% withdrawal rate. A further insurance policy against retirement homes and the like is strength training. A great many “downward spirals of elderliness” occur due to muscular weakness.

Since 50% of my income goes to retirement anyway I don’t need to make six figures to live. So I could theoretically work half the hours, if I’m willing to stop contributing. If returns suck for the first 10 years of retirement but draw rare remains as high as 4%, the risk of running out of money in retirement is much higher. Also, I retired in 2005 rather than 2011, but I haven’t been drawing on investment income in the last few years due to the good fortune of increasing post-retirement income for both Mrs. MM and myself.

So when the market slumps in your first 5 years of retirement, you now have the knowledge and wisdom to pick up a wrench and bully through it. Counting on part-time work in retirement could be a gamble. If you’re in great health, might get a workable plan but as you get older the risk of health issues increases. Also, the vast majority of,people don’t wait till 70 to get Social Security even though there is a significant gain in benefits for waiting. The safe withdrawal rate in retirement has historically been 4% on assets. However, recent research by financial researchers who focus in retirement, including Wade Pfau and Michael Kitces indicate that we may be currently heading into years of historically low returns.

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I order to see what my stock performance is, I have to back out the cash/CD component of my portfolio. Let’s say I average 40% cash/CD during this 10-year period, and am only 60% invested in the stock market. Let’s assume I average a 1% return on the cash. That would make my total return on the stock portion about 6.93%, compared to the S&P average of 6.46% during the same period. When you’re buying stocks, you’re buying the earnings, assets, and likely future earnings and assets of a company.

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While you cannot prevent your inevitable decline, you can do a hell of a lot to stop it using simple strength training a few days a week. Be aware the S&P gives you a good Indices Trading Strategies: How to Trade Indices exposure to worldwide markets, not just the US. Many of those 500 companies have profits earned oveseas. This is neither good or bad, it just depends on what you want.

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