This forum loves stocks, but will they love you back?

[Tangler]

My plan has been to diversify into industrial real estate in Southern California.

Any experience with this?
Reasons why you ( as an eye doc) will be competitive relative to full time experienced RE investors with an informational advantage?
I would just throw some in vanguard REIT & VTSAX and work extra at your eye doc job but who knows you might crush it.

[Eyemd356]

Any experience with this?
Reasons why you ( as an eye doc) will be competitive relative to full time experienced RE investors with an informational advantage?
I would just throw some in vanguard REIT & VTSAX and work extra at your eye doc job but who knows you might crush it.

the Only advantage was being there before the market got crazy and one of the buildings was a pocket listing.
it would be impossible to buy the same buildings in this market when there is very little for sale and when one does come up the RE investors you mention are paying prices that would be difficult to make positive ROI.

the good news is that All the buildings are paid for and if those same RE investors or big developers want to come in and pay 3x market value😀

[childay]

The forum membership skews older. I'm sure there are many here who got to "enjoy" the stock market= returns of 2000-2010.

Lets see:
https://forum.whitecoatinvestor.com/...at-is-your-age

[Tangler]

I’ve been doing it for 6 years.
the Only advantage was maybe that I got in the market early and one of the buildings I bought was a pocket listing.
it would be impossible to buy the same buildings in this market when there is very little for sale and when one does come up the RE investors you mention are paying prices that would be difficult for me to make positive ROI.

the good news is that All the buildings are paid for and it those same RE investors or big developers want to come in and pay 3x market value, I’ll listen.

wow! Sounds like you are going to kill il! Good job!

[uksho]

Thanks for posting .

So, who is considered young according to this article . 10 years , 15 years or 20 or more before retirement.

also , if someone has a portfolio with 4-5 million dollars , even if 50 percent is in stocks at retirement, how does it matter ( provided they can’t survive in 100k plus SS)

[Shant]

I've been investing since 1983 and I am in the 100% equities camp. I don't think I've had a lost decade but I certainly remember 5 or 6 years of sustained losses. Yes you have to have some level of discipline which I accomplished by not checking my investment performance when I knew it was ugly. I use other strategies to mitigate the risk, like working longer, limiting my fixed expenses, and getting a rental property that will either keep pace with inflation or I would be willing to live in if things seriously exploded. I looked at bonds and historically they did not protect me from the risks so I see no reason to give up the expected added return. And I am definitely not seeing the sense in signing up for a guaranteed negative return.

[Dont_know_mind]

He did provoke a few questions: Is it consistent to believe US stock market could fail an investor but SS would remain safe?

Or is it consistent to think that the US stock market could fail the investor but US government bonds would remain safe?

[Dont_know_mind]

I've been investing since 1983 and I am in the 100% equities camp. I don't think I've had a lost decade but I certainly remember 5 or 6 years of sustained losses. Yes you have to have some level of discipline which I accomplished by not checking my investment performance when I knew it was ugly. I use other strategies to mitigate the risk, like working longer, limiting my fixed expenses, and getting a rental property that will either keep pace with inflation or I would be willing to live in if things seriously exploded. I looked at bonds and historically they did not protect me from the risks so I see no reason to give up the expected added return. And I am definitely not seeing the sense in signing up for a guaranteed negative return.

In the past when real yields were positive, they made a lot of sense. At negative real yields, not so much and even less so if they get to negative nominal yields.

[Larry Ragman]

Or is it consistent to think that the US stock market could fail the investor but US government bonds would remain safe?

I don't think the issue or concern is actually that the markets will fail, at least over a term of more than 10 years. Rather, it is that a "lost" decade will alter the trajectory of the drawdown phase and put longer term retirement spending at risk. Regarding stocks versus bonds we are in a historically anomalous period of slowly rising interest rates (driving down prices) at the end of a long bull market. There aren't obvious and easy answers on where to deploy money. I plan a cash cushion of several years spending.

[jfoxcpacfp]

Apropriately-diversified equity mutual fund/ETF portfolio (all low-cost index for clients) for the long term, rebalanced annually, and invested according to the dictates of a financial plan is what we preach and I have not yet found a reason to waiver from that. Appropriately-diversified does not mean tech heavy (been there, done that, had the carryover) or owning highly undiversified individual pieces of real estate (same story, 2007-2008, still working on liquidating a can’t miss real estate partnership, fortunately invested cash), but a plan to invest only the money that you do not need for at least 5 years. If you will need it during that time period (again, according to the dictates of a financial plan, which most people don’t want to bother with), again, buy bonds (I d/n look at this as an investment, but a liquidity option), CD’s, or keep $$ in savings. All we have is long-term history…and our imaginations.

Emotions very important, of course. But, again, very few people want to take the time and/or spend the money for real financial planning. It’s so so much easier to default to formulas. And, for doctor families, it really doesn’t matter whether you are on track to die with $50M, $75M, of $100M+, so who cares if you die a little “poorer”?

But what you don’t see is the potential in your life and career choices that you are bypassing - earlier retirement, knowing whether you can afford college + med school for your kids, travel plans, etc. But, most importantly, being FI and no longer stressing over whether you are doing “enough” and fighting about money with your spouse.

[Tangler]

I plan a cash cushion of several years spending.

This.

This is my latest obsession. The giant taxable cash bucket for EF + SORR. I am building this for retirement in a few years.

The Money in IRAs (that I don't need for >20 years) is then going to become mostly stocks.

I will keep buying I-bonds. (while they are paying well).

I will keep a small amount of bonds in IRAs to act as "dry powder" to take advantage of buying opportunities. (likely a fools errand but emotionally if feels good to buy a little after the market drops 5, 10, 20%). If the market drops >20% I will just convert all those bonds to stocks and turn off the news = noise.

Obviously time in beats timing so I will keep a really high stock allocation + Cash bucket.

Bonds for the long run just do not make sense to me right now.

Sorry to perseverate.

[TheDangerZone]

ERN demonstrates the same thing in his Safe Withdrawal Rate series. That is, either bond tent or rising equity glide path make sense for those retiring at a more or less normal age. As always, devil is in the details. For early retirees he argues the need for high equity allocations because of longer time horizons and less access to SS. For those of you who take comfort in the fact that stocks have always recovered, bear in mind that the issue +/- 5 years from retirement is the withdrawals you make in the down market. These have the inverse of compounded gains.

What to do? Save a lot; invest in equities; go 60/40 or 50/50 at retirement; start building equities again 3-5 years later. YMMV

So one thing that troubles me; Take two early retirees

A: Retires at age 45 with a 40 year horizon and goes to 50/50 for 3 years. After 36 months, portfolio growth has kept up pace with inflation and the 3% withdrawals.

B: Retires at 48 with a 37 year horizon and goes to 50/50.

A is basically equivalent B after 3 years and still with a lengthy retirement ahead so why should they start building up their equities while B stays at 50/50 for 3-5 years? You might even say A is now three years removed from employment and would have a harder time rejoining the workforce if their portfolio takes a massive hit. I would be interested in the thinking through this scenario as I don't fundamentally understand why AA should change based on years after early retirement. It would make more sense to me to build up equities as you approach a 30 or 25 or 20 year horizon.

[Larry Ragman]

So one thing that troubles me; Take two early retirees

A: Retires at age 45 with a 40 year horizon and goes to 50/50 for 3 years. After 36 months, portfolio growth has kept up pace with inflation and the 3% withdrawals.

B: Retires at 48 with a 37 year horizon and goes to 50/50.

A is basically equivalent B after 3 years and still with a lengthy retirement ahead so why should they start building up their equities while B stays at 50/50 for 3-5 years? You might even say A is now three years removed from employment and would have a harder time rejoining the workforce if their portfolio takes a massive hit. I would be interested in the thinking through this scenario as I don't fundamentally understand why AA should change based on years after early retirement. It would make more sense to me to build up equities as you approach a 30 or 25 or 20 year horizon.

First, let's be very clear that the bond tent and equity glide path approaches are best suited for traditional age retirees NOT early retirees. The SORR is worse for the 60+ crowd because they have a shorter period of time to potentially recover from a market downturn. With a 40 year or so horizon, Karstan argues that something closer to 100% equities is appropriate because the equities have a better long term performance and that is necessary to keep increasing wealth to keep up with inflation. Any market downturns could be countered with either flexible spending or return to work.

Now, maybe more to the general point about the rolling risk over three years? In practice, if there is no market downturn in that period then there was no advantage. In fact, the person that started earlier just gave up three years of potential gains. But that isn't the point. The move to safety is a counter to the potential of a market downturn. (The Bernstein bromide: if you have won stop playing the game.) Presumably one starts retirement with enough as long as wealth is not lost, so this is a wealth preservation move. Could you stay aggressively invested and do well? Of course. In fact, that is the most likely outcome barring the rare lost decades (30s, 70s, 00s). One makes these moves to be very conservative.

Back to my earlier point. If you have enough, and by that I mean over save to have more than enough, then you don't have to care. Keep a float of several years worth of expenses (however you care to think about it) and aggressively invest the rest if that is what you want to do. You will probably end up richer than me.

[TheDangerZone]

First, let's be very clear that the bond tent and equity glide path approaches are best suited for traditional age retirees NOT early retirees. The SORR is worse for the 60+ crowd because they have a shorter period of time to potentially recover from a market downturn. With a 40 year or so horizon, Karstan argues that something closer to 100% equities is appropriate because the equities have a better long term performance and that is necessary to keep increasing wealth to keep up with inflation. Any market downturns could be countered with either flexible spending or return to work.

Now, maybe more to the general point about the rolling risk over three years? In practice, if there is no market downturn in that period then there was no advantage. In fact, the person that started earlier just gave up three years of potential gains. But that isn't the point. The move to safety is a counter to the potential of a market downturn. (The Bernstein bromide: if you have won stop playing the game.) Presumably one starts retirement with enough as long as wealth is not lost, so this is a wealth preservation move. Could you stay aggressively invested and do well? Of course. In fact, that is the most likely outcome barring the rare lost decades (30s, 70s, 00s). One makes these moves to be very conservative.

Back to my earlier point. If you have enough, and by that I mean over save to have more than enough, then you don't have to care. Keep a float of several years worth of expenses (however you care to think about it) and aggressively invest the rest if that is what you want to do. You will probably end up richer than me.

I see, thank you for clarifying. That all makes sense. I may have read over your initial post too quickly and misinterpreted that the entirety was applicable to early retirees. I plan to keep 3 years of expenses in cash if/when the time comes.

[Larry Ragman]

I see, thank you for clarifying. That all makes sense. I may have read over your initial post too quickly and misinterpreted that the entirety was applicable to early retirees. I plan to keep 3 years of expenses in cash if/when the time comes.

If this stuff interests you I highly recommend the ERN Safe Withdrawal Rate series. Karstan is focused on the early retirement cohort, but publishes a ton of data for all scenarios. This link will guide you to the major posts so you don't have to read them all. The Safe Withdrawal Rate Series – A Guide for First-Time Readers – Early Retirement Now