Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I work for an institutional fund manager who has returned about 19% annually since 2006. Although I'm only the assistant, I know the ins and outs of the strategy.. I could replicate it using different securities (and not break SEC regulations) and invest my money with it.. but I choose not to. Why?
It's too volatile.
It would require me to look at my portfolio every single day and make investment decisions.. every dip will cause me to worry since my own money is on the line.
That's exactly how I feel about high risk, high return strategies (which, by the way, I've tried a few years ago and bailed out on with modest profits after being unable to take the volatility.)
I highly doubt the average person could take the volatility associated with a strategy earning 15% or higher a year when the S&P500 is returning about half that.. which is why I recommend a Passive strategy (there are countless passive asset allocations out there but that's a story for another thread.)
17.6% is an impressive return since 2005, no doubt about it.. but I doubt I could stomach the volatility with your strategy (let alone the average person.)
Great point--and I will grant you, my strategy is VOLATILE. Maybe I am an adrenaline junkie.
I started out many years ago as a long-term investor and gradually found that I could increase returns while decreasing draw-downs by shortening my holding periods and going for smaller gains. It took a lot of work but eventually I got to the point where I could quit my job and support my family on day trading a $120k account, which I did for a little over 7 years. While I enjoyed the strategy development part of trading, the staring at bar charts on a monitor for 6 1/2 hours per day was no fun.
Right now, I spend 20 minutes looking over my various investments after the close on trading days. After that, I'm done.
If I had to spend 6 1/2 hours per day on trading strategies or even just thinking about trading, then that would not my definition of freedom. I might as well keep working at my current job. It would make no difference at all to me.
I think the problem with this is that it beat working for a living for you. And I think that's great. But it's wildly unrealistic to expect that most people have both the knowledge and the temperament to get these kinds of gains even in good economic times, let alone bad ones like the last decade.
Most folks would probably be better off investing a good chunk of their salaries in low cost mutual funds that own a mix of stocks and bonds. They're known as "balanced" funds here in the U.S.
You do realize this same argument can be used for opening a business too. That is the beauty of the market. You can go with the pack and most likely be safe, but never experience a large field to yourself or you can leave the pack and depending on your skill set... eat 1000x more grass or starve. That is why people shouldn't say, "well historically YOU would have made more money if you just invested in a mix of things."
I agree like in business, most people shouldn't do it/can't do it. If everyone could do it, than everyone would be millionaires. However, just because your neighbor failed, doesn't mean you have the same odds of failing. It is up to the individual and each individual is different. I am not a millionaire, but I know my account would be a fraction of the size if I didn't invest in individual stocks.
That's just a blank standard. Estimating the return of equities isn't an easy thing, it depends which equity they hold.
Personally... I have no interest in bonds with current rates, but I'm young and have a high risk tolerance. The "balance" between bonds and others is for your average person, to help them control their emotion.
You'd want to also grow the invested amount. Inflation and such.
I managed similar for a few years, but got bored with it. Time consuming, girlfriend didn't like that. Then I got distracted with real estate. She doesn't like that either, but it isn't as time consuming. Long positions I hold are doing fine. I still watch some stocks to buy on dips, but I seldom sell much these days.
You always want some cash around to take advantage of opportunities, but the amount scales by person. I have to keep cash around simply because while I can expect to be paid, it isn't necessarily weekly.
Index funds weren't around in 1926?
I cannot even be bothered with CDs these days for the interest rates offered.
index funds were not around but the s&p 500 index was. whenever we talk in general terms we talk in terms of an index. studies are based on ithem as well.
why should a conservative investor still use bonds?
because they are not stocks .
when the stock markets take that fall as they always do bonds tend to move in the other direction cushioning the fall with capital gains.
cash will not do that ..
thats about the only reason you would want them.
yes they could act as a weight in a bull market , but they can also make that drag up when stocks fall as they produce capital gains .
there are no guarantees that we won't have some scenerio where stocks and bonds fall but the odds say when one falls the other goes up.
2008-2009 saw markets fall 45% while long treasuries were up 40%.
many times winning is by not losing. the less you fall the less you need in gains to get back. that makes the same gains possible over time with less volatility.
my own portfolio was about 20% less volatile as the s&p 500 and produced far more in gains over 26 years. to me that is what i want for my investing style.
Last edited by mathjak107; 07-29-2013 at 02:34 AM..
Great point--and I will grant you, my strategy is VOLATILE. Maybe I am an adrenaline junkie.
i am not saying it is your case but to ofton those that dabble in individule issues have so little of their money invested that while their returns are good it does not amount to a hill of beans in comparison to what they do not have invested.
i used to work with a guy who was pretty good at stock picking but he did it with only 20% of his money.
many folks are to scared to invest large sums of money into stocks when they invest . so when taken as a whole with all their assets including cash their overall returns suck..
I think the problem with this is that it beat working for a living for you. And I think that's great. But it's wildly unrealistic to expect that most people have both the knowledge and the temperament to get these kinds of gains even in good economic times, let alone bad ones like the last decade.
Most folks would probably be better off investing a good chunk of their salaries in low cost mutual funds that own a mix of stocks and bonds. They're known as "balanced" funds here in the U.S.
I don't disagree with what you say. But the OP asked if it's possible to live entirely off the stock market and my experience is yes it is possible.
Not everybody could or would want to. Some would try and fail. Some would do it way better than I have. And yes for most people the approach you mention is probably better.
Maybe I've been skillful or maybe I've just been lucky, but I have done it.
I work for an institutional fund manager who has returned about 19% annually since 2006. Although I'm only the assistant, I know the ins and outs of the strategy.. I could replicate it using different securities (and not break SEC regulations) and invest my money with it.. but I choose not to. Why?
It's too volatile.
It would require me to look at my portfolio every single day and make investment decisions.. every dip will cause me to worry since my own money is on the line.
That's exactly how I feel about high risk, high return strategies (which, by the way, I've tried a few years ago and bailed out on with modest profits after being unable to take the volatility.)
I highly doubt the average person could take the volatility associated with a strategy earning 15% or higher a year when the S&P500 is returning about half that.. which is why I recommend a Passive strategy (there are countless passive asset allocations out there but that's a story for another thread.)
17.6% is an impressive return since 2005, no doubt about it.. but I doubt I could stomach the volatility with your strategy (let alone the average person.)
same here as far as the volatility. my daughter inlaw works for one of the richest ,most successful and popular hedge fund managers of all time and i have not one penny invested with them. the volatility is far greater than what would let me sleep at night.
I don't disagree with what you say. But the OP asked if it's possible to live entirely off the stock market and my experience is yes it is possible.
Not everybody could or would want to. Some would try and fail. Some would do it way better than I have. And yes for most people the approach you mention is probably better.
Maybe I've been skillful or maybe I've just been lucky, but I have done it.
the real people we want to hear from are those who have been living off their investments since 2000 .
no actually 2002 is not the right time frame . anyone who retired based on setting a withdrawal rate when stocks peaked just before the collapse of the dot coms would be the interesting time frame.
withdrawal rates and spend down may be very different for those from 2001 on .
anyone before the big fall would have started out with a higher withdrawal rate since the asset base would have been much higher.
trying to pull that much may have left many in bad shape at this point unless spending took a big cut.
I thought it might be interesting to see how folks who pulled the plug in 2000 faired so far considering researchers are saying those who retired in 2000 may be on track to be the worst case scenario out of 111 rolling 30 year retirement periods since 1926.
Last edited by mathjak107; 07-29-2013 at 05:44 AM..
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
