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How to Invest for Retirement

C

ClosingADoor

Member
longdi said:
Should we have an exit strategy for passive etf? Probably being asked b4.

Say i have 100 unrealised profit now, then shit seems to start, do i set an exit point like say 75? Or do i continue to add positions on the downtrend?

Will like to know if there's some formula to obtain that '75' exit figure.
Click to expand...
You keep buying just like you always do. Markets go up and down. Let's say you exit at 75. Then the downtrend stops at 70 and it goes up again. Do you enter the market? Do you stay out?

Just keep the money in, add over time. If the market crashes, you buy on the cheap for that time.

Of course this is a bit different if you are close to retiring, but you have probably transferred to bonds mostly by then.
 
E

Easystride

Member
Does anyone have much experience with HSAs as a retirement vehicle? My company is getting rid of some of its' policy options and offering this next year. I have an HRA plan now, but I fear they are phasing it out, so was going to make the switch this year. They will put in $500/year.

It is through SelectAccount, and it looks like for $18/year (and a minimum balance of $1,000), you can invest in various mutual funds.
 
G

GhaleonEB

Member
Others have this covered, but I thought I'd note one big benefit of continuing to invest through a downturn in the market: you get to buy lots of shares when the market is down. Discounts galore.

My wife and I did not change investment strategies going into the 2008 crash - we just kept investing. Bought on the way down, while it was down, and then on the way up. In 2008, when the market crashed, our investments were flat for the year because the market decline was roughly offset by what we put in. (This wouldn't be the case now, as the amount we have invested is larger, but contributions would still take a big bite out of the drop.)

When the market rebounded we had racked up a LOT of shares from continuing to invest each month. When the recovery began, the graph of our portfolio was nearly a 45 degree upward line. For 3-4 years.

Had we pulled out when the crash happened, we'd have lost out on buying cheap shares, and then lost out on a good hunk of the recovery (because it was choppy for a while) on top of it. That's a double whammy that would have chopped our retirement savings pretty hard, relative to just continuing to plug away and riding it through.
 
longdi

longdi

Banned
The most popular ETFs today, started around 2010-2011, the run up till date has been a good ride for long investors, DCA ETF is getting the recommendations partly because of luck,i dont think it has went through tougher times?

If the next crash is really bad, worse than Black Monday, our ETFs gain over the past 8 years may get wipe to square 1 if we continue DCA, ignoring the warning signs?

Say in 2011, i started the ETF at $50
In 2017, i have 100 EFT at $100
In 2018, Trumpanomics finally catches up with Obama reforms, Apple products bomba, big brokerage firms scandal unveiled. The indices shat bricks! Within the month, the ETF value falls to $10!

If i had an exit plan, i will have quickly sold all at $75, once filled, i may initiate a buy 10 at $60, another 10 at $50, another 20 at $40, another 20 at $30, but hedged a 40 at $76. The antithesis of passive ETF!

Would this make sense? Lock in my 8 years gains, and DCA from the beginning? Im sure some smartier and more experienced investors have thought through this..
 
P

Piecake

Member
longdi said:
The most popular ETFs today, started around 2010-2011, the run up till date has been a good ride for long investors, DCA ETF is getting the recommendations partly because of luck,i dont think it has went through tougher times?

If the next crash is really bad, worse than Black Monday, our ETFs gain over the past 8 years may get wipe to square 1 if we continue DCA, ignoring the warning signs?

Say in 2011, i started the ETF at $50
In 2017, i have 100 EFT at $100
In 2018, Trumpanomics finally catches up with Obama reforms, Apple products bomba, big brokerage firms scandal unveiled. The indices shat bricks! Within the month, the ETF value falls to $10!

If i had an exit plan, i will have quickly sold all at $75, once filled, i may initiate a buy 10 at $60, another 10 at $50, another 20 at $40, another 20 at $30, but hedged a 40 at $76. The antithesis of passive ETF!

Would this make sense? Lock in my 8 years gains, and DCA from the beginning? Im sure some smartier and more experienced investors have thought through this..
Click to expand...

What if the ETF dropped down to $75, stayed there, and then shot back up again in a week or so?

That is also a perfectly reasonable scenario where if you implemented your plan you would have fucked yourself over.

There is much debate on market efficiency i.e. how well and how fast the markets incorporate information about future profits. It is of note that on certain occasions the market can appear relatively random. One example is the October 1987 market crash (Black Monday) where the international stock markets, including the US, fell 20% or more in a single day. Subsequent analysis by Robert Shiller, the Nobel Prize winning economist, based on surveying investors suggested that the decline was due to investor psychology and did not have an obvious external cause. If true, this creates a substantial challenge for market timing because such ephemeral causes can be extremely hard to predict and forecast. It is one thing to forecast and predict something that is rational, but quite another to predict something that may, at times, hinge on the whims of human psychology.
Click to expand...

https://www.forbes.com/sites/simonmoore/2016/03/07/the-myth-of-market-timing/#1bd0697461e6

Market timing doesnt work because we don't know what the market is going to do. And even if we are 'due' for a market recession, we have no idea when that is going to happen.

Nonetheless, if there are real patterns to be found whether by looking at charts or other analysis, let’s look at how good investors actually are at finding them and timing the market. Dalbar, a financial market research firm, examine returns investors received relative to the market. They find over the past 20 years, investors in equity funds have lagged the S&P 500 benchmark by an average of 4.66% per year, on average. Part of this outcome is due to poor timing decisions according to Dalbar's analysis.

For example, the greatest loss for investors according to Dalbar data over the past 30 years came in October 2008. This was a volatile month; the S&P 500 started above 1,100 but at times closed in the 800s, representing a decline of 27% within a single month. Only the S&P 500 then rebounded somewhat and finished the month 14% off the lows. Clearly, October 2008 was a roller coaster of a month and relatively unusual in market history - we saw greater swings in October 2008 than are often seen over a whole year.

But we can see that investors can be their own worst enemy - selling at the times of greatest panic, and potentially then missing out on subsequent gains. Basically, although you can look at a stock chart and imagine what you might do, your actual behavior may be quite different than you project due to the emotions of fear and greed. This can consume even the most well intentioned investor. Therefore, for many investors what appears to be rational market timing may actually be giving into the emotions of fear and greed, with unfortunate results. Of course, it is tempting to believe that you are a better investor than average, or at least better at keeping your emotions under control, but there is also substantial evidence that people are generally over confident about their own ability in many fields from driving safety to investing skill.
Click to expand...

https://www.forbes.com/sites/simonmoore/2016/03/07/the-myth-of-market-timing/#1bd0697461e6

The odds are quite good that you are simply going to guess wrong and fuck yourself over. The whole point of passive index investing is not to rely on luck, but take a long-term and logical approach to investing where at the end of it you will have enough money to have a happy retirement.
 
C

ClosingADoor

Member
longdi said:
The most popular ETFs today, started around 2010-2011, the run up till date has been a good ride for long investors, DCA ETF is getting the recommendations partly because of luck,i dont think it has went through tougher times?

If the next crash is really bad, worse than Black Monday, our ETFs gain over the past 8 years may get wipe to square 1 if we continue DCA, ignoring the warning signs?

Say in 2011, i started the ETF at $50
In 2017, i have 100 EFT at $100
In 2018, Trumpanomics finally catches up with Obama reforms, Apple products bomba, big brokerage firms scandal unveiled. The indices shat bricks! Within the month, the ETF value falls to $10!

If i had an exit plan, i will have quickly sold all at $75, once filled, i may initiate a buy 10 at $60, another 10 at $50, another 20 at $40, another 20 at $30, but hedged a 40 at $76. The antithesis of passive ETF!

Would this make sense? Lock in my 8 years gains, and DCA from the beginning? Im sure some smartier and more experienced investors have thought through this..
Click to expand...
I think you are treating this as a normal stock, which it isn't. For a normal stock of 1 company, you set a stop loss because there is no way to know if that company recovers.

For the overall market, things will recover. It always has, and if it doesn't, we got bigger problems in the world then caring about my retirement.

You can't know if that $60 is going to be reached, or that $50, etc. And if you say you buy back anyway at $76, then you lost that $1 and after that it can go down again anyway, repeating the process. Dangerous game if it is going to be a sideways market for a while. Meanwhile you are missing out on dividend payments to reinvest.

People have been predicting that crash for years now. It might it in 2018, it might be in 2020 or 2022, we can't know. And we also can't know how big it is going to be. Maybe we go up another 50% to "crash" 25% after, still leaving you coming out on top since you just kept putting money in.

Don't time the market, it won't work. If you want to do active investments, set some money aside and join us in the Stock thread for individual picks. But that is a whole other game.
 
B

Blubikins

Neo Member
Thanks for that link regarding HSAs. Just started open enrollment for next year at my company and I'm considering switching to this plan for the retirement benefits of all that tax free money.
 
S

SyNapSe

Member
longdi said:
The most popular ETFs today, started around 2010-2011, the run up till date has been a good ride for long investors
Click to expand...

I'm not sure what "most popular" accounts for but SPY probably has the largest cap and volume for ETFs and it started in 1993. Many ETFs are just carriers for the same assets Mutual Funds carried for years. Do you want to carry your Apples to the market in a cardboard box or plastic tub? In the end, you sell your Apples at the market.
 
G

GoldenEye 007

Member
FliXFantatier said:
I have an HSA that I max out and plan to use for retirement. :)

http://www.madfientist.com/ultimate-retirement-account/
Click to expand...

Huh, this is interesting. I'm on an HDHP plan now with an HSA as I'm young/single and just don't incur a lot of medical expenses at this time. But I'm getting married next year and I don't know if it makes sense to switch over to a regular PPO. My employer does contribute some and that would go up when I add a dependent.

Medical things can be a gamble and I know eventually we'd try to start a family, etc. The good thing is that we do have some savings, but it's one of those things where you bank on not having high medical expenses regularly.

So basically you can max out tax free for the contributions, invest the funds, grow them tax free, and eventually withdraw them tax free. As long as you keep your receipts and I guess treat hard copies and digital copies like cash to be reimbursed much later on.

But if you lose receipts you basically have to wait until 65 to withdraw without penalty and it would be taxed like income tax at that time?
 
P

PflargBlarg

Member
longdi said:
The most popular ETFs today, started around 2010-2011, the run up till date has been a good ride for long investors, DCA ETF is getting the recommendations partly because of luck,i dont think it has went through tougher times?

If the next crash is really bad, worse than Black Monday, our ETFs gain over the past 8 years may get wipe to square 1 if we continue DCA, ignoring the warning signs?

Say in 2011, i started the ETF at $50
In 2017, i have 100 EFT at $100
In 2018, Trumpanomics finally catches up with Obama reforms, Apple products bomba, big brokerage firms scandal unveiled. The indices shat bricks! Within the month, the ETF value falls to $10!

If i had an exit plan, i will have quickly sold all at $75, once filled, i may initiate a buy 10 at $60, another 10 at $50, another 20 at $40, another 20 at $30, but hedged a 40 at $76. The antithesis of passive ETF!

Would this make sense? Lock in my 8 years gains, and DCA from the beginning? Im sure some smartier and more experienced investors have thought through this..
Click to expand...

Yeah...you could go do all this stuff based on some sort of reasoning but in the end it's all based on nothing. It's broad index investing, either it's going to rebound or the country will collapse so...yeah. Just keep investing, no need for any of this complex stuff. Especially if you're globally diversified.
 
M

Makai

Member
Wormdundee said:
Yeah...you could go do all this stuff based on some sort of reasoning but in the end it's all based on nothing. It's broad index investing, either it's going to rebound or the country will collapse so...yeah. Just keep investing, no need for any of this complex stuff. Especially if you're globally diversified.
Click to expand...
nikkei-chart-mint-large.png
Click to expand...

It doesn't have to be apocalyptic to peak.
 
C

ClosingADoor

Member
Makai said:
It doesn't have to be apocalyptic to peak.
Click to expand...
Graph ends at 2009, when it was at +- 10.000. It is at 21.000+ now. Even if you had gotten in at the peak in December 1989, and you had continued to invest every month, you probably have come out ahead, although I can't find a calculator for it. If you invested once at the peak, the return now with dividends reinvested would be... -0.903%. According to this one that is: https://dqydj.com/nikkei-return-calculator-dividend-reinvestment/

And this is why you diversify and have international funds, not just the local one.
 
J

jackbrown

Neo Member
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