What I've heard over the years:
1. July to October, gold is strong.
2. Oil bottoms in Nov-Dec, then rises to June high.
3. Falling dollar makes money overseas.
4. Buy home builders in Oct; keep until Jan (they go up).
5. When consumer discretionary income outperforms consumer staples, that says the market is strong.
6. Buy before Fed meeting.....sell after.
7. Healthcare lags in election years.
8. Best time to put money in the market is the end of the month (from the 28th of the current month to the 6th of the next month). Second best time is from the 11th to the 18th. This is before 401 money comes in.
9. Use the Peter Lynch model. Tell the unknowing what you're going to do and see what they say....if they even understand because it may be too complicated.
Now, what do you guys know?
God bless
the Pudd
Comments
I'll add a number 10, that is a likely offset for number 8 and perhaps several other numbers, too.
The first baby boomers will begin RMD's this year from IRA's, etc. This will continue in large volume for another 18 or so years. Roughly, 3.75-4% of combined RMD accounts monies will be removed annually from IRA holdings by law. Now, this money may be invested again in something taxable or spent or ??? Broad investment cash flows will have dueling inbound and outbound currents, eh? At least in this country.
I don't get paid enough to perform a long term study of the affect; but someone probably has a complete theory published somewhere online.
Regards,
Catch
Note: I find that the below site now wants a log in..........A browser reset (if you do such a thing at least daily) allowed me to read the entire article without log in.
http://www.investmentnews.com/article/20160620/BLOG05/160619910/baby-boomers-reach-required-minimum-distribution-milestone-for
I'll place this link for the broad based Google search. You will find more links of your choice here.
https://www.google.com/#q=when+will+first+baby+boomer+begin+IRA+RMD's
Our situation may not be typical. Remains to be seen what happens. I do see a lot of reasons for both bond and equity markets to decline, but RMD wasn't at the top of my list.
Regards
I haven't started RMD withdrawals , but think I'm the opposite of you. AS I've said before , different strokes for different folks.
Derf
Always at the top of most lists is the generic advice to pay yourself first, which is nebulous enough to mean different things to different folks.
But the topic is always fun and stimulates a variety of responses, some very controversial. Also, any answer is dynamic. What worked yesterday may well be a lodestone today. Things change. Here are a few that I've tried to follow in the past:
1. Hold a bond portfolio percentage equal to your age ( that's a Jack Bogle suggestion)
2. Save 10% of your income.
3. Pay off your highest interest debt first, usually credit- card debt.
4. To sustain a portfolio forever during retirement, never withdraw more than 4% annually (many Monte Carlo simulations support that recommendation but never show a 100% success forecast).
Today, the wisdom of some of these rules are challenged. One certainly is that in the financial universe, controversy will be present. There is a motherlode of websites that provide lists similar to those discussed on this posting. Here is a reference to one such site:
http://www.getrichslowly.org/blog/2009/03/09/25-favorite-financial-rules-of-thumb/
Enjoy. Rules of thumb come and go. As Hoyt Axton sang: " Some you win, some you lose. The winners all grin, and the losers say deal the cards again." I realize I referenced Axton's "The Devil" song recently, but there's a ton of wisdom embedded in it.
Best Wshes.
You noted: "To sustain a portfolio forever during retirement, never withdraw more than 4% annually"
>>>Sidenote: At least relative to IRA accounts, 4% more or less will be a legal requirement upon the account holder; which one chooses or not for such a withdrawal.
I don't know that RMD's will have a large impact on markets in general, only the fact that based upon 10-15 years ago when almost everyone I know who were working were placing monies into 401k or 403b's. Most of these folks have retired and rolled these accounts into IRA's. Many have already begun RMD's and more to follow every year. I know that very few have converted monies to Roth's.
So, just saying that what used to be a large batch of inbound money flows stopped and the outflows have begun. 'Course, the majority of companies have forced in the last 15 years to have employees use self directed accounts, versus the traditional pension being offered. Don't know how much money is inbound from the current working groups.
http://www.benefitspro.com/2015/06/30/total-retirement-assets-near-25-trillion-mark
Lastly. I have not tested the snowblower yet. But, the thought has crossed my mind.
Take care,
Catch
Yes it was. For several years I've been pulling about 7% annually (give or take) from IRAs to supplement pension and SS. According to the linked calculator, at age 71 the "required" RMD is only about half of what we actually withdrew in a recent year. (They calculate the growth needed to off-set the RMD at only 3.92%.)
The required amount does increase as one ages. But at the onset, it seems relatively small. When considering Roths are exempt from RMD, our required distribution as a percentage of all our IRA investments is even smaller - likely around 2.5%.
Sorry so long-winded. Hope this makes sense
RMD Calculator http://apps.finra.org/calcs/1/rmd
>> 1. Hold a bond portfolio percentage equal to your age (that's a Jack Bogle suggestion)
Sigh. You left out something crucially important. See:
https://www.bogleheads.org/wiki/Asset_allocation#cite_note-10
" ... pension and Social Security payments would be considered bondlike investments. "
Thank you for reading my post in such detail and for your meaningful addition.. I wrote the rules I listed from memory. I recognize that all the rules lists are incomplete All these rules are very general guidelines and some investors take issue with many of them.
I suppose we can characterize them as "glittering generalities".
I have always considered all four of my wife's and my retirement pensions and social security payouts as completely risk free incomes that dramatically reduce any annual portfolio withdrawal needs to nearly zero. Life is good.
Best Wishes.
I agree with your comment that equities should just about always be part of a portfolio. I referenced Bogle's rule only as one common investment rule. I do not subscribe to it; I wonder if he still advocates it given current market conditions. Change happens and so does perceived wisdom.
One terrific tool to explore candidate future outcomes is Monte Carlo analyses (sorry that I am a broken record on this tool). Using that tool, portfolio survival odds can be estimated for any number of possible future returns. The possible returns and their standard deviations can be parametrically examined for various mixes of stocks and bonds.
Many Monte Carlo simulations are accessible for free on the Internet. I like one from Portfolio Visualizer because of its flexibility. Here is a Link to it:
https://www.portfoliovisualizer.com/monte-carlo-simulation#analysisResults
Please give it a try and prosper.
Best Wishes.
Can't tell whom you're railing against now for unfairness or pickiness or whatever it is, but you do love to opine broadly and generally and then do not at all care for being called on it --- Dale Carnegie! --- when you're wrongheaded or misleading or incomplete. This time I was simply pointing out that Bogle's comment includes bondlike holdings like SS and pensions, which you had failed to remember.
Otherwise, as BobC rightly points out, the advice is senseless and unaffordable for most, and all the Monte Carlo in the world would not show good outcomes for a 70yo retired w/ only 30% equity.
I never meant to imply that any tool should replace a human in making a decision. That's always our job.
Monte Carlo is just another tool to help in what could be a daunting decision when complex tradeoffs are present. But it is a powerful tool to add to anyone's toolkit. It allows a user to postulate countless what-if scenarios. As an output it projects likely portfolio survival probabilities. Inputs are much more complete than age.
For example, a user who is 70 can explore portfolio survival odds as a function of annual withdrawal rate for the next 25 years for various expected portfolio returns. The program outputs some numbers that the user can interpret to make a more informed decision. The user decides what is acceptable in terms of risk and what is not.
In many ways life is a gamble, and Monte Carlo is a tool that informs its users of portfolio survival odds. I used Monte Carlo tools when making my retirement decision and it served me well. I'm sure I am not unique in that regard.
Give Monte Carlo a fair look/see. It might not be a good fit to the way you make decisions, but it just might be the tool that completes your toolbox. As always, you decide.
Best Wishes.
Gut instincts are usually not a good idea when making any decision, especially investment decisions.
In the closing statement of your most recent harangue, you posited that Monte Carlo simulations would show bad outcomes for a portfolio with 30% equities for a 70 year old. That's a wrong assertion.
It was a simple 5 minute task to run a representative set of simulations on the Monte Carlo code that I referenced. I ran the code for an initial 4% withdrawal rate and used historical market return statistics and inflation rate stats. To add some realism, I ran the fat-tailed return distribution option for a simple US equity and total bond set of holdings.
For the 30% equity position, predicted portfolio survival rates were 99%, 96%, and 92% for 25, 30, and 35 year timeframes, respectively.
Not too bad. My own preference is for 20 to 1 odds, so only the two shorter timeframes are risk acceptable for me. Others would select other survival thresholds. Naturally, survival results are expected returns sensitive. These are easily explored on this terrific tool.
As always, I recommend that MFOers give it a test run. Its easy input and running speed are especially attractive. You are always free to choose and free to criticize. But give it a fair test.
Best Wishes.
Have never been a gut investor.
So it all depends on how much one will be needing for cashflow and what the sleep@night thresholds are. You go right ahead and stick with your misreading of Bogle's recommendations. The older the investor the better, in that regard.
@ron, actually, at 82, with such a shorter life expectancy, heavy bond proportion does not make much difference, but again always depending on starting amount and runrate.
You do a quick and ineffective 2-step.
Here is a direct quote from one of your last posts: " ...... and all the Monte Carlo in the world would not show good outcomes for a 70yo retired w/ only 30% equity."
I guess I just did the impossible. I used a Monte Carlo code that you now claim familiarity with and I demonstrated that a 30% equity/70% bond mixed portfolio has an acceptable survival potential for a timeframe that stretches to about 30 years long. That's not too shabby. The analyses were done for a reasonable set of assumptions.
You were wrong earlier and you are still wrong.
Your posts directed at me have a mean-spirted flavor to them. That doesn't score very well with most MFO members. Your negative comments do not dissuade me. I like a challenge; it motivates me. I was a good soldier and plan to "Continue the March" on this website.
You may not like my writing style but you are in the minority. Throughout my long career I was often selected for projects because of my writing skills. I partially wrote countless winning competitive work proposals for the companies that employed me, and the government specifically requested my services several times to write major sections of complex summary reports.
Best Wishes. I mean that. I harbor no grudges.
"all the Monte Carlo in the world would not show good outcomes for a 70yo retired w/ only 30% equity."
With just those two data points, I would not expect much of an answer either. The link that MJG provided is an excellent place to work out a MCS for yourself.
@JohnChisum- hey there John- it's not "angst" so much as being told the same thing over and over and over and......
As if everyone but ol' MJG has an attention span of ten seconds, or maybe an investment IQ of 10.
It was getting real old a few years ago, and hasn't gotten any fresher since.
Yes, I've been touting the Monte Carlo tool for a long time. It's the right tool for the right job given the uncertainties of market returns and their random sequencing. I talked it way back in FundAlarm days and have been a consistent advocate for over 20 .years.
When I was planning for retirement, I recognized that it was the right tool for that job. Monte Carlo codes were not commonly available in that time period so I wrote my own code with a little help from Bill Sharpe and Gene Fama. Today these tools are readily accessible and much more flexible in terms of capability and options.
I know that MFO regulars appreciate the availability and power of Monte Carlo codes. A few guys really do use them. I am not addressing my Monte Carlo recommendations to that cohort. Much more importantly, I am posting for the fresh faces that continually join our discussion population. Some of these folks were never exposed to the powerful Monte Carlo toolset.
I post for these folks. Sorry if this disturbs you, but the solution is easy enough. Just ignore my Monte Carlo references which you argued against back in the FundAlarm glory days.
For some folks things don't change much.
Best Wishes.
Anyway, depending on which MCS, and looking ahead to ~25y out, 70% equity gets her near ~55% success, while 70% bonds has a success probability of half that or less. Since she's math-savvy, she got the points of how to think ahead about adjusting her allocations and her withdrawal rates. Real folks, not in MJG's position of privilege, say, grok these variables all the time, so I was glad to give her guidelines and a reality check.
I hesitate to offer any portfolio advice since I am not a financial professional, but given her needs and portfolio size, you are guiding your female friend in the right direction.
How do I reach that provisional conclusion? I made a single run using the Portfolio Visualizer Monte Carlo tool. I say provisional because I only performed one simulation case.
I input a 100% equity portfolio to bound the probabilities. I ran a mix of US large caps, US small value caps, REITs, and International equity holdings with 60%, 20%, 10%, and 10% weightings. Results were in the 90% success range for the 25 year period.
Monte Carlo is a great tool for these tough cases. I'm sure your friend appreciates your effort.
Best Wishes.
@MikeM said
I'll add, if you attempt to follow the posted list, you will not even come close to the returns of a diversified portfolio
Here's an (adage,rule of thumb,old wive's tale,flip a coin) addition to the original list.
Don't Fight The Fed
Trigger warning.May be offensive.
Money for Nothing and the Chicks are "eating machine"(s) ???
Trump Slams Yellen: The Fed Has Created A “Stock Bubble” And “A False Economy” To Boost Obama:
One month ago, Donald Trump urged his followers to sell stocks, warning of “very scary scenarios” for investors, and accused the Fed of setting the stage for the next market crash when he said that “interest rates are artificially low” during a phone interview with Fox Business. “The only reason the stock market is where it is is because you get free money.”
http://www.infiniteunknown.net/tag/janet-yellen/
...Trump's 3:00 AM tweet..
Hillary Clinton said the episode was evidence that "a man who can be provoked by a tweet should not have the nuclear codes."
“Who gets up at 3 a.m. in the morning to engage in a Twitter attack against a former Miss Universe?
http://www.reuters.com/article/us-usa-election-trump-idUSKCN1201WD
..real old a few years ago..
This doesn't get old out your way.At least in the the even years !
It must be an Even Year: Giants headed back to postseason
http://www.sfexaminer.com/must-even-year-giants-headed-back-postseason/
One of the best in all of sports.I'll be cheering.
Giants catcher Buster Posey and his wife, Kristen, announced plans Wednesday to spearhead efforts to raise money for research and awareness of pediatric cancer.
http://m.mlb.com/news/article/173527386/buster-posey-to-help-fight-pediatric-cancer/