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The trick is the to get those inflation-adjusted returns you need 100% time exposure. No selling because circumstances force you to. No selling because you get

The trick is the to get those inflation-adjusted returns you need 100% time exposure. No selling because circumstances force you to. No selling because you get spooked at a 50% drawdown. Not many people can tolerate even a 20% hit, which explains a lot about the situation the world economy finds itself in.

TheFreim 4y ago
This is why I don't follow how my portfolio is doing, knowing doesn't give me much actual information and can often encourage bad behavior (admittedly I don't have many investments compared to many).
- SV_BubbleTime 4y ago
  I'm with you. I consider this an area where the burden of knowledge will hit you pretty hard. Time suck along with stress, and performing at best case a few percent over an automated "MODERATE RISK" button. I don't have any more time in my life to track anything with the degree that it would take to "be good" at it.
- s1artibartfast 4y ago
  My philosophy is essentially buy low, hold forever. I don't put money that I might realistically need in the market
  - deathanatos 4y ago
    I mean… that defeats the point, no? Surely you must plan to use the money at some point, even if that is just enjoying the end of your days. That's still a time horizon. > I don't put money that I might realistically need in the market While it's great that you might have a time horizon far, far into the future, not everyone has that luxury. In theory, I'm supposed to purchase a home & start a family around this point in my life, so that's a rather quick time horizon for at least some portion of my wealth.
    - s1artibartfast 4y ago
      I think you have a point. I should have been more clear. What I'm saying is I don't account for anticipated withdraw when investing. That's not to say I don't or won't do it, just that it's not a consideration when putting the money in. I treat the question of if I can afford to take money out or if it is a good time to take money out as an entirely separate topic. I found that trying to optimize investing and weigh risks for a short-term Horizon will drive you crazy.
    - xeromal 4y ago
      My strategy is to ignore it until about my late 40s early 50s and then start slowly cycling it over into more reasonable investments and bonds.
compumike 4y ago
You're right, and the conventional advice has been to have a mix of stocks and bonds, with bonds to reduce volatility and preserve some of the wealth that you might need to access in the shorter term. However, what's unusual about the past few months is that bonds have been getting whacked too! Here's a comparison of four Vanguard funds, with stock:bond ratios of 80:20, 60:40, 40:60, 20:80 respectively: https://totalrealreturns.com/s/VASGX,VSMGX,VSCGX,VASIX https://totalrealreturns.com/s/VASGX,VSMGX,VSCGX,VASIX What I find interesting is that they are all experiencing significant and comparable drawdowns right now. Here are treasury bonds with a comparison between duration: https://totalrealreturns.com/s/VFISX,VFITX,VUSTX https://totalrealreturns.com/s/VFISX,VFITX,VUSTX And here are corporate bonds with a comparison between duration: https://totalrealreturns.com/s/VFSTX,VFICX,VWESX https://totalrealreturns.com/s/VFSTX,VFICX,VWESX Even inflation-protected bonds (TIPS) are in trouble: https://totalrealreturns.com/s/VIPSX https://totalrealreturns.com/s/VIPSX So right now, bonds are not doing much to provide the short-term real wealth preservation that lets people take the 100% time exposure risk.
- tunesmith 4y ago
  Bond funds are different than bonds. With bonds, you can hold them to maturity and not get whacked.
  - jlawson 4y ago
    You can hold bond funds to the maturity date of the underlying bonds and get the same result (minus fees). But in either case, you still get whacked with inflation, which would show up on this chart as a drop.
    - sicp-enjoyer 4y ago
      At an individual bonds maturity I get the full principal back. How do I do that principal back from a bond fund if the value has dropped due to the macro environment?
      - jlawson 4y ago
smt88 4y ago
> No selling because you get spooked at a 50% drawdown. This is common-sense trading advice anyway. If short-term losses spook you into selling, you're probably doing too much stock-picking and are not long enough. In fact, this is the often-cited reason that active investors can't beat index funds consistently.

TheFreim 4y ago

This is why I don't follow how my portfolio is doing, knowing doesn't give me much actual information and can often encourage bad behavior (admittedly I don't have many investments compared to many).

SV_BubbleTime 4y ago
I'm with you. I consider this an area where the burden of knowledge will hit you pretty hard. Time suck along with stress, and performing at best case a few percent over an automated "MODERATE RISK" button. I don't have any more time in my life to track anything with the degree that it would take to "be good" at it.
s1artibartfast 4y ago
My philosophy is essentially buy low, hold forever. I don't put money that I might realistically need in the market
- deathanatos 4y ago
  I mean… that defeats the point, no? Surely you must plan to use the money at some point, even if that is just enjoying the end of your days. That's still a time horizon. > I don't put money that I might realistically need in the market While it's great that you might have a time horizon far, far into the future, not everyone has that luxury. In theory, I'm supposed to purchase a home & start a family around this point in my life, so that's a rather quick time horizon for at least some portion of my wealth.
  - s1artibartfast 4y ago
    I think you have a point. I should have been more clear. What I'm saying is I don't account for anticipated withdraw when investing. That's not to say I don't or won't do it, just that it's not a consideration when putting the money in. I treat the question of if I can afford to take money out or if it is a good time to take money out as an entirely separate topic. I found that trying to optimize investing and weigh risks for a short-term Horizon will drive you crazy.
  - xeromal 4y ago
    My strategy is to ignore it until about my late 40s early 50s and then start slowly cycling it over into more reasonable investments and bonds.

compumike 4y ago

You're right, and the conventional advice has been to have a mix of stocks and bonds, with bonds to reduce volatility and preserve some of the wealth that you might need to access in the shorter term. However, what's unusual about the past few months is that bonds have been getting whacked too! Here's a comparison of four Vanguard funds, with stock:bond ratios of 80:20, 60:40, 40:60, 20:80 respectively: https://totalrealreturns.com/s/VASGX,VSMGX,VSCGX,VASIX https://totalrealreturns.com/s/VASGX,VSMGX,VSCGX,VASIX What I find interesting is that they are all experiencing significant and comparable drawdowns right now. Here are treasury bonds with a comparison between duration: https://totalrealreturns.com/s/VFISX,VFITX,VUSTX https://totalrealreturns.com/s/VFISX,VFITX,VUSTX And here are corporate bonds with a comparison between duration: https://totalrealreturns.com/s/VFSTX,VFICX,VWESX https://totalrealreturns.com/s/VFSTX,VFICX,VWESX Even inflation-protected bonds (TIPS) are in trouble: https://totalrealreturns.com/s/VIPSX https://totalrealreturns.com/s/VIPSX So right now, bonds are not doing much to provide the short-term real wealth preservation that lets people take the 100% time exposure risk.

tunesmith 4y ago
Bond funds are different than bonds. With bonds, you can hold them to maturity and not get whacked.
- jlawson 4y ago
  You can hold bond funds to the maturity date of the underlying bonds and get the same result (minus fees). But in either case, you still get whacked with inflation, which would show up on this chart as a drop.
  - sicp-enjoyer 4y ago
    At an individual bonds maturity I get the full principal back. How do I do that principal back from a bond fund if the value has dropped due to the macro environment?
    - jlawson 4y ago

smt88 4y ago

> No selling because you get spooked at a 50% drawdown. This is common-sense trading advice anyway. If short-term losses spook you into selling, you're probably doing too much stock-picking and are not long enough. In fact, this is the often-cited reason that active investors can't beat index funds consistently.