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A Simple Investment Strategy That Worked in 2019: Buy Almost Anything

64 points by KFC_Manager 7y ago

rb808 7y ago
I've seen a few people online giving up jobs, retiring early because they make enough money trading or investing now. Deja vu all over again.
- sct202 7y ago
  I've seen it too, and some of them are doing it on the leaner side (<$500k) on the assumption that if things get bad they can just work a little to make up any shortfalls.
  - JKCalhoun 7y ago
    I confess that is my outlook — that I could go back to work to make up for unforeseen shortfalls. (Not retired yet, BTW, but I think about it.) To be sure, jobs could become scarce, unemployment skyrocket — always in motion the future is.... But for myself there is another factor that has been weighing more heavily on me which is, what do I want to do with the time I have left on this planet? I'm not sure if that is orthogonal to the market rally of the past decade and if it has more to do with my age though.
    - perfunctory 7y ago
      > But for myself there is another factor that has been weighing more heavily on me which is, what do I want to do with the time I have left on this planet? Please work on solving climate crisis.
    - hogFeast 7y ago
      Yes, it is related to the rally (we saw this in 06/07). And the time at which jobs become scarce is the time your portfolio is down 50-60% in six months, and you are taking income from a rapidly shrinking pile. Don't risk everything you have for something you don't need.
    - cortesoft 7y ago
      > To be sure, jobs could become scarce, unemployment skyrocket — always in motion the future is.... The problem with that plan (go back to work if investments tank) is that the risks are correlated; if the market crashes, jobs become scarce. Your primary and backup plan are likely to fail at the same time.
  - ac29 7y ago
    I wonder where they are retiring. 4% of $500k (considered a "safe" withdrawal for retirees of traditional retirement age) is $20k/year. Even if you own your home outright, thats pretty light anywhere in the US.
    - Digory 7y ago
      Likely planning on heavy withdrawals for a few years until social security kicks in. Would be interesting to imagine a world where US retirees are subject to the same safety nets as younger Americans.
    - sct202 7y ago
      From what I've seen some end up in very non-traditional housing situations abroad or in the states like one woman lives in a train car. The ones who blog about it also pick up side jobs (blogs, gig jobs, light freelancing) to make up a few thousand at least a year. And then none of them have kids or plan on having kids.
- JKCalhoun 7y ago
  Yeah, I remember. What's the strategy that will work in 2020 Sell everything perhaps.... Or are we setting the stage for the Roaring Twenties? Or did we just exit that decade? Maybe the (20)20's will be seen as the Great(er) Depression. Perhaps we're a decade out of phase with the last century.
  - rb808 7y ago
    I remember in 98 a lot of investment managers said we're in a bubble and went conservative. They missed out of a lot of upside and many got fired. Nobody knows whats going to happen this year, probably depends mostly on the election.
    - JKCalhoun 7y ago
      That is my frustration: I've been too conservative too early and missed a chunk of the rally. Only a manager of my own investments so not likely to be fired. ;-)
      - ilikehurdles 7y ago
        If you had been too conservative for all 2018 you'd also have missed out on the few down days that eliminated all gains that year. So even if you sat out for a year due to your imprecise prediction, you'd have come out ahead of others who owned stocks. Problem is predicting which 8-12 month period the down days will happen. Seems like it should be reasonable to able to do that, but predictions of weather patterns over the same time range seem more accurate.
    - Scoundreller 7y ago
      Over time, there have been a lot more up days than bad days, but the bad days are really bad. I remember somewhere that tabulated how much you’d have if you only sat in on the top 100 UP days and top 100 DOWN days, you’d have massive losses. But overall, things go up. So sitting out the market in hopes of missing a down day only works if you know what the down days are, otherwise you’re missing out on the gradual average UP days.
- PretzelFisch 7y ago
  If they are setting themselves up to live off a 3-4% withdrawal rate they should be safe otherwise it's quite the speculation. Maybe it will work out "No body knows nothing"-- John Bogle
  - rb808 7y ago
    3-4% withdrawal rate is not safe in an era of negative rates and high asset prices.
  - opo 7y ago
    The Trinity study (which is where the oft-quoted 4% rule seems to have originated) is assuming a max of about 30 years of withdrawals before the money is depleted. If people are retiring early, it isn't clear what a reasonable withdrawal rate would be. >...The 4% refers to the portion of the portfolio withdrawn during the first year; it is assumed that the portion withdrawn in subsequent years will increase with the consumer price index (CPI) to keep pace with the cost of living. The withdrawals may exceed the income earned by the portfolio, and the total value of the portfolio may well shrink during periods when the stock market performs poorly. It is assumed that the portfolio needs to last thirty years. The withdrawal regime is deemed to have failed if the portfolio is exhausted in less than thirty years and to have succeeded if there are unspent assets at the end of the period. https://en.wikipedia.org/wiki/Trinity_study https://en.wikipedia.org/wiki/Trinity_study (Also the wikipedia article has a number of criticisms of the study.)
H8crilA 7y ago
All the while corporate earnings didn't go up. Go figure. At this point, with so much stimulus, I'm wondering if the next crisis will be a deflationary one, like everyone is expecting (i.e. a stock market crash, people fired, credit frozen) or the inflationary type (long drag of stagflation).
- outside1234 7y ago
  Whatever it is, because of the titantic trillion dollar deficit and already low interest rates, we will have no way of dealing with it from a macroeconomic sense.
  - beamatronic 7y ago
    There’s a lot of policy changes that could be done to press the Accelerator pedal on the economy. Let in 10 million new immigrants. Eminent domain a hyper loop from New York to LA. Rollback building restrictions in the bay area.
    - Scoundreller 7y ago
      Don’t forget giving money to poor people. Just think of the wage growth and increased recreation if anyone could say “screw it” to bad employers and still have a roof over their head. Give people a year off for parental leave, then young people get a 1yr placement in increasingly senior positions.
      - frockington1 7y ago
        Don't we already heavily subsidize poverty via welfare programs? I don't see how throwing even more money at a problem would have a different outcome.
        Apocryphon 7y ago
        https://www.fastcompany.com/3049642/how-to-fight-poverty-its-simple-give-cash-to-poor-people https://www.fastcompany.com/3049642/how-to-fight-poverty-its...
nahname 7y ago
Sure didn't help that 2018 ended with everything being down 15-20%, this year was more of a rebound than a continuous healthy market.
- airstrike 7y ago
  Thank you! This is such an obvious point and yet it's hardly ever mentioned. It may seem intuitive, but it's actually entirely arbitrary to pick 12/31/2018 through 12/31/2019 as the time period for a returns analysis.
  - avn2109 7y ago
    >> "...it's actually entirely arbitrary..." This is one good objection to the article. Another objection is that they have spun "central bank inflates financial asset bubble which is correlated across all asset classes" as a good thing. And it seems to have never crossed the credulous author's mind that asset classes with correlated gains also have correlated losses. Even by the NYT's extremely-naive standards of thinking critically about financial markets, this is a weak effort.
- nullc 7y ago
  Not just ended with every down, but made a significant fraction of that drop happening on a single day (Dec 24th). It was a good day to do tax loss harvesting...
hkmurakami 7y ago
Except... There were significant performance disparities and risk profiles for each of these asset classes that nominally "went up"
- alltakendamned 7y ago
  where could I read/learn more about these ?
petilon 7y ago
This is a misleading story. Yes, the stock market rose significantly in 2019. But it had also dipped severely at the end of 2018. When you account for that dip, stock performance has been average. Example: On Dec 21 2018 SPY (S&P 500 ETF) was trading for $240.70. Today it is trading for $323.07, which is a huge 34% jump. But on Sep 21 2018 it was trading for $291.99. Compared to that high, the increase is a mediocre 10.6%
- AznHisoka 7y ago
  10.6 is mediocre? I would take those returns every single year.
  - petilon 7y ago
    Then invest in the stock market. Even accounting for the dotcom crash and the 2008 crash the stock market has gone up around 10% every year when you average it out.
    - AznHisoka 7y ago
      It has averaged close to 5% from January 2000 to now...
      - icedchai 7y ago
        The 2000's were a bad decade for investing. You had the dot com crash, followed by 9/11, and then the financial crisis. I "saved" a ton during that time, but the returns were mediocre. The 80's, 90's and most of the 2010's were much, much better for market performance, closer to the average of 10%. See https://www.macrotrends.net/2526/sp-500-historical-annual-returns https://www.macrotrends.net/2526/sp-500-historical-annual-re...
        AznHisoka 7y ago
        That’s true. unfortunately you can’t cherry pick with foresight what decades you want to skip when investing.
maerF0x0 7y ago
To consider the flip side of a coin. This is the continued devaluation of monetary instruments. You can look at as the s&p500 rose by 29%. Or you can look at it as "The USD" buys 23% fewer shares than last year. (ideally this would be adjusted for profit growth and inflation too) IMO this is totally expected given negative interest rates and QE.

64 points by KFC_Manager 7y ago

I've seen a few people online giving up jobs, retiring early because they make enough money trading or investing now. Deja vu all over again.

sct202 7y ago
I've seen it too, and some of them are doing it on the leaner side (<$500k) on the assumption that if things get bad they can just work a little to make up any shortfalls.
- JKCalhoun 7y ago
  I confess that is my outlook — that I could go back to work to make up for unforeseen shortfalls. (Not retired yet, BTW, but I think about it.) To be sure, jobs could become scarce, unemployment skyrocket — always in motion the future is.... But for myself there is another factor that has been weighing more heavily on me which is, what do I want to do with the time I have left on this planet? I'm not sure if that is orthogonal to the market rally of the past decade and if it has more to do with my age though.
  - perfunctory 7y ago
    > But for myself there is another factor that has been weighing more heavily on me which is, what do I want to do with the time I have left on this planet? Please work on solving climate crisis.
  - hogFeast 7y ago
    Yes, it is related to the rally (we saw this in 06/07). And the time at which jobs become scarce is the time your portfolio is down 50-60% in six months, and you are taking income from a rapidly shrinking pile. Don't risk everything you have for something you don't need.
  - cortesoft 7y ago
    > To be sure, jobs could become scarce, unemployment skyrocket — always in motion the future is.... The problem with that plan (go back to work if investments tank) is that the risks are correlated; if the market crashes, jobs become scarce. Your primary and backup plan are likely to fail at the same time.
- ac29 7y ago
  I wonder where they are retiring. 4% of $500k (considered a "safe" withdrawal for retirees of traditional retirement age) is $20k/year. Even if you own your home outright, thats pretty light anywhere in the US.
  - Digory 7y ago
    Likely planning on heavy withdrawals for a few years until social security kicks in. Would be interesting to imagine a world where US retirees are subject to the same safety nets as younger Americans.
  - sct202 7y ago
    From what I've seen some end up in very non-traditional housing situations abroad or in the states like one woman lives in a train car. The ones who blog about it also pick up side jobs (blogs, gig jobs, light freelancing) to make up a few thousand at least a year. And then none of them have kids or plan on having kids.
JKCalhoun 7y ago
Yeah, I remember. What's the strategy that will work in 2020 Sell everything perhaps.... Or are we setting the stage for the Roaring Twenties? Or did we just exit that decade? Maybe the (20)20's will be seen as the Great(er) Depression. Perhaps we're a decade out of phase with the last century.
- rb808 7y ago
  I remember in 98 a lot of investment managers said we're in a bubble and went conservative. They missed out of a lot of upside and many got fired. Nobody knows whats going to happen this year, probably depends mostly on the election.
  - JKCalhoun 7y ago
    That is my frustration: I've been too conservative too early and missed a chunk of the rally. Only a manager of my own investments so not likely to be fired. ;-)
    - ilikehurdles 7y ago
      If you had been too conservative for all 2018 you'd also have missed out on the few down days that eliminated all gains that year. So even if you sat out for a year due to your imprecise prediction, you'd have come out ahead of others who owned stocks. Problem is predicting which 8-12 month period the down days will happen. Seems like it should be reasonable to able to do that, but predictions of weather patterns over the same time range seem more accurate.
  - Scoundreller 7y ago
    Over time, there have been a lot more up days than bad days, but the bad days are really bad. I remember somewhere that tabulated how much you’d have if you only sat in on the top 100 UP days and top 100 DOWN days, you’d have massive losses. But overall, things go up. So sitting out the market in hopes of missing a down day only works if you know what the down days are, otherwise you’re missing out on the gradual average UP days.
PretzelFisch 7y ago
If they are setting themselves up to live off a 3-4% withdrawal rate they should be safe otherwise it's quite the speculation. Maybe it will work out "No body knows nothing"-- John Bogle
- rb808 7y ago
  3-4% withdrawal rate is not safe in an era of negative rates and high asset prices.
- opo 7y ago
  The Trinity study (which is where the oft-quoted 4% rule seems to have originated) is assuming a max of about 30 years of withdrawals before the money is depleted. If people are retiring early, it isn't clear what a reasonable withdrawal rate would be. >...The 4% refers to the portion of the portfolio withdrawn during the first year; it is assumed that the portion withdrawn in subsequent years will increase with the consumer price index (CPI) to keep pace with the cost of living. The withdrawals may exceed the income earned by the portfolio, and the total value of the portfolio may well shrink during periods when the stock market performs poorly. It is assumed that the portfolio needs to last thirty years. The withdrawal regime is deemed to have failed if the portfolio is exhausted in less than thirty years and to have succeeded if there are unspent assets at the end of the period. https://en.wikipedia.org/wiki/Trinity_study https://en.wikipedia.org/wiki/Trinity_study (Also the wikipedia article has a number of criticisms of the study.)

H8crilA 7y ago

All the while corporate earnings didn't go up. Go figure. At this point, with so much stimulus, I'm wondering if the next crisis will be a deflationary one, like everyone is expecting (i.e. a stock market crash, people fired, credit frozen) or the inflationary type (long drag of stagflation).

outside1234 7y ago
Whatever it is, because of the titantic trillion dollar deficit and already low interest rates, we will have no way of dealing with it from a macroeconomic sense.
- beamatronic 7y ago
  There’s a lot of policy changes that could be done to press the Accelerator pedal on the economy. Let in 10 million new immigrants. Eminent domain a hyper loop from New York to LA. Rollback building restrictions in the bay area.
  - Scoundreller 7y ago
    Don’t forget giving money to poor people. Just think of the wage growth and increased recreation if anyone could say “screw it” to bad employers and still have a roof over their head. Give people a year off for parental leave, then young people get a 1yr placement in increasingly senior positions.
    - frockington1 7y ago
      Don't we already heavily subsidize poverty via welfare programs? I don't see how throwing even more money at a problem would have a different outcome.
      - Apocryphon 7y ago
        https://www.fastcompany.com/3049642/how-to-fight-poverty-its-simple-give-cash-to-poor-people https://www.fastcompany.com/3049642/how-to-fight-poverty-its...

nahname 7y ago

Sure didn't help that 2018 ended with everything being down 15-20%, this year was more of a rebound than a continuous healthy market.

airstrike 7y ago
Thank you! This is such an obvious point and yet it's hardly ever mentioned. It may seem intuitive, but it's actually entirely arbitrary to pick 12/31/2018 through 12/31/2019 as the time period for a returns analysis.
- avn2109 7y ago
  >> "...it's actually entirely arbitrary..." This is one good objection to the article. Another objection is that they have spun "central bank inflates financial asset bubble which is correlated across all asset classes" as a good thing. And it seems to have never crossed the credulous author's mind that asset classes with correlated gains also have correlated losses. Even by the NYT's extremely-naive standards of thinking critically about financial markets, this is a weak effort.
nullc 7y ago
Not just ended with every down, but made a significant fraction of that drop happening on a single day (Dec 24th). It was a good day to do tax loss harvesting...

hkmurakami 7y ago

Except... There were significant performance disparities and risk profiles for each of these asset classes that nominally "went up"

alltakendamned 7y ago
where could I read/learn more about these ?

petilon 7y ago

This is a misleading story. Yes, the stock market rose significantly in 2019. But it had also dipped severely at the end of 2018. When you account for that dip, stock performance has been average. Example: On Dec 21 2018 SPY (S&P 500 ETF) was trading for $240.70. Today it is trading for $323.07, which is a huge 34% jump. But on Sep 21 2018 it was trading for $291.99. Compared to that high, the increase is a mediocre 10.6%

AznHisoka 7y ago
10.6 is mediocre? I would take those returns every single year.
- petilon 7y ago
  Then invest in the stock market. Even accounting for the dotcom crash and the 2008 crash the stock market has gone up around 10% every year when you average it out.
  - AznHisoka 7y ago
    It has averaged close to 5% from January 2000 to now...
    - icedchai 7y ago
      The 2000's were a bad decade for investing. You had the dot com crash, followed by 9/11, and then the financial crisis. I "saved" a ton during that time, but the returns were mediocre. The 80's, 90's and most of the 2010's were much, much better for market performance, closer to the average of 10%. See https://www.macrotrends.net/2526/sp-500-historical-annual-returns https://www.macrotrends.net/2526/sp-500-historical-annual-re...
      - AznHisoka 7y ago
        That’s true. unfortunately you can’t cherry pick with foresight what decades you want to skip when investing.

maerF0x0 7y ago

To consider the flip side of a coin. This is the continued devaluation of monetary instruments. You can look at as the s&p500 rose by 29%. Or you can look at it as "The USD" buys 23% fewer shares than last year. (ideally this would be adjusted for profit growth and inflation too) IMO this is totally expected given negative interest rates and QE.