The Long View, Ignoring the noise, and staying the course

[Tangler]

Guess I am writing this for myself as much as for others.

Recently reading a lot of stuff (forum posts etc.) by people concerned and saying things like "how do I invest in these crazy times?"

Morning star has a good podcast called: The Long View. I am borrowing the name.

That is the way to think and act (IMPO).

Seems like I have given this advice several times recently.

Great friend (pediatrician / intensive care doc / anesthesiologist) who is an amazing doc that does a lot of peds cardiac anesthesia and is perhaps one of the smartest people I know called me Monday and asked: "Tangler, this market is a mess, I am thinking of pulling some cash out........."

I told him to stay the course and if he has $ keep buying. It is on sale.

Someone here has a kid with a Roth IRA and was worried about investing for this person with a time horizon of over 30-40 years!

Another forum person in there 30's has 600k in cash and is hesitant to invest it ...........some (400k or so) borrowed on a HELOC at 3% sitting in cash and losing value.........



Anyway the point of this long rambling post is as follows:

1. VTI (VTSAX) and VXUS will be substantially higher in 20-30 years therefore invest.

2. In the short term things might look terrible and might drop another 10, 20, 30%, 50%

3. If #2 happens and it sickens you (as it will me.....b/c it means lives lost, families destroyed, countries crushed) turn off the news and ignore it

4. Control what you can; otherwise ignore the noise. Short term financial news is mostly noise.

5. Global non-finacial news is also so saddening that I am not sure it makes sense to over do it. I probably need to turn it off more.



Anyway, this is my thinking.

My question for you is as follows:

Is my thinking sound?

Tell me if I am wrong and why?

Give me some encouragement here if possible or tell me why my thinking is flawed.

I am not the panic sell type and I am not near that point but the news lately is a little heavy and sad.

I need to focus on the long view, stay the course, control what is controllable, ignore the noise, and the things out of my hands.

Thanks

[uksho]

Guess I am writing this for myself as much as for others.

Recently reading a lot of stuff (forum posts etc.) by people concerned and saying things like "how do I invest in these crazy times?"

Morning star has a good podcast called: The Long View. I am borrowing the name.

That is the way to thing and act (IMPO).

Seems like I have given this advice several times recently.

Great friend (pediatrician / intensive care doc / anesthesiologist) who is an amazing doc that does a lot of peds cardiac anesthesia and is perhaps one of the smartest people I know called me Monday and asked: "Tangler, this market is a mess, I am thinking of pulling some cash out........."

I told him to stay the course and if he has $ keep buying. It is on sale.

Someone here has a kid with a Roth IRA and was worried about investing for this person with a time horizon of over 30-40 years!

Another forum person in there 30's has 600k in cash and is hesitant to invest it ...........some (400k or so) borrowed on a HELOC at 3% sitting in cash and losing value.........



Anyway the point of this long rambling post is as follows:

1. VTI (VTSAX) and VXUS will be substantially higher in 20-30 years therefore invest.

2. In the short term things might look terrible and might drop another 10, 20, 30%

3. If #2 happens and it sickens you (as it will me.....b/c it means lives lost, families destroyed, countries crushed) turn off the news and ignore it

4. Control what you can; otherwise ignore the noise. Short term financial news is mostly noise.

5. Global non-finacial news is also so saddening that I am not sure it makes sense to over do it. I probably need to turn it off more.



Anyway, this is my thinking.

My question for you is as follows:

Is my thinking sound?

Tell me if I am wrong and why?

Give me some encouragement here if possible or tell me why my thinking is flawed.

I am not the panic sell type and I am not near that point but the news lately is a little heavy and sad.

I need to focus on the long view, stay the course, control what is controllable, ignore the noise, and the things out of my hands.

Thanks

Sound thinking .
not pulling out anything .
have bought 40K since Jan ( 20 K scheduled, DCA), apart from 403/457, rest buying the dip mentality
I am frustrated , not because of stock market , but due to real estate market .
thinking about other people in world makes me aware of the privilege we have and that our worries are meaningless compared to theirs .

[Larry Ragman]

Seems like a very reasonable approach to me. I’m trying it myself. Normally I read several counterpoint news sources daily but at the moment I am just skimming headlines. WSJ makes this easy online. I tend to check my investments daily (hey, it’s easy to do on Vanguard), but now I am not opening the accounts. To your point, I just leave the investments on autopilot.

[artemis]

It's a sound plan, but there is always the possibility that stocks go down and do NOT come back up (at least not for a very long time). Japan in the 1980s taught us that. I don't think it's likely at all, but the chances of that happening are not zero. Still, unless you have a working crystal ball what can you do but play the odds?

[burritos]

Stay the course. At least that's what I'm doing. But people don't listen to me, so buyer beware.

[uksho]

It's a sound plan, but there is always the possibility that stocks go down and do NOT come back up (at least not for a very long time). Japan in the 1980s taught us that. I don't think it's likely at all, but the chances of that happening are not zero. Still, unless you have a working crystal ball what can you do but play the odds?

Curious , what happened to inflation and real estate prices etc in Japan during the lost decades ?

[Tangler]

Curious , what happened to inflation and real estate prices etc in Japan during the lost decades ?

My mother-in-law is 82, she is Japanese and lived in Japan for years. In Tokyo she rented and said: “almost every one rents as the homes go down in value with time….” I don’t know if this is true or if it is just her thoughts or if this is for the last 20-50 years or………

who knows???!!! I have 25-30% in VXUS in case we are Japan in 1980s, but again, zero control and again, long view is that the USA has never had a 20 year down period and if we do …….nothing will work.

Stay the course.

[Lithium]

Sounds like a great investing plan, but as a podcast it sounds like the equivalent of watching the paint dry ;-)

[wideopenspaces]

My mother-in-law is 82, she is Japanese and lived in Japan for years. In Tokyo she rented and said: “almost every one rents as the homes go down in value with time….” I don’t know if this is true or if it is just her thoughts or if this is for the last 20-50 years or………

who knows???!!! I have 25-30% in VXUS in case we are Japan in 1980s, but again, zero control and again, long view is that the USA has never had a 20 year down period and if we do …….nothing will work.

Stay the course.

I recently read an interesting article about quality affordable housing and they used Japan as the example. Houses there are built to last about 30 years so, so noone really owns real estate there. But because they are always using the newest advances in housing the quality of what is available is good. It doesn't sound very environmentally friendly but they also don't have to worry about asbestos and lead paint, etc. So she is right but it's just how they do things over there and not really comparable to American real estate.

On the whole I agree with your plan/sentiment. I tell most of my patients most days to spend less time with the news and more time with the people and things that matter to them.

[Antares]

Personally I am staying the course. But I hate it, and I as I’m planning to go to semiretirement in one year, I would hate to go into that in the middle of a major market crash. But if I have to I will. I’ve prepared for it, will keep earning some money, and I’ve set aside 5 years of expenses in cash. I hope (and expect) that’s enough time for the markets to recover. We’ll see.

That said, a friend who is quite wealthy (and retired), ex-hedge fund manager, got out of the markets in December due to his perception that inflation was going to begin to hurt the markets as the reality sinks in that the Fed will have to rise rates. This was way before the current crisis. He is actively buying energy futures contracts for months out, believing they are not pricing in what he thinks is likely to happen. And buying gold and oil companies (not sure what kind), arguing that it’s unwise to take comfort in being out of the markets as inflation eats away at his wealth.

He may be right or wrong. He knows more than I do. Good luck to him. I am sure if I tried to take active measures my chances of doing worse in the long run would go up. Stories like his bug me, because they create the illusion that I ought to be doing something, and that if I did I might be protected, or at least better off. There may be some people who can be successful at this. The crucial piece is knowing whether or not you are one of them.

[triad]

its a little different for the recently retired. I sold my practice a few months ago and these are fairly scary times. in addition to VTI and VXUS being down 12% long treasuries are also down 7%. the only part of my portfolio in the green is my intermediate TIPS fund (and just barely positive ytd). I only have 5 years of expenses in TIPS so I might be headed back to the salt mines if things don't turn around within a few years...

[Tangler]

its a little different for the recently retired. I sold my practice a few months ago and these are fairly scary times. in addition to VTI and VXUS being down 12% long treasuries are also down 7%. the only part of my portfolio in the green is my intermediate TIPS fund (and just barely positive ytd). I only have 5 years of expenses in TIPS so I might be headed back to the salt mines if things don't turn around within a few years...

Yes, i really think as a recently retired doc that is the only intelligent move. As an ordinary doc playing games with commodity futures or options would really scar me more than the market. Informational disadvantage and lack of proper training and experience.

If we get a prolonged downturn, as a doc I think the advice is: You either work more, spend less, or a little of both.

Things an ordinary doc cannot do:
1. panic sell (obviously)
2. spend too much (need to be saving more)
3. Retire too early (if they are 1-2 years out, they might want to hit pause unless they have 5 years of cash saved, and they probably should have 5 years of cash)
4. Time the market (sell before the crash and buy back at the bottom). Dancing in and out seems so easy in hindsight but I think many mess it up.
5. Get too fancy (commodity futures, currencies, options, buy leverage buy large amounts of crypto) these are all enticing things to the WCI forum nerd but actually pulling the trigger on massive deals......at least for me a boring Boglehead-type creature would be disastrous.

Things I will do:
1. Stay the course
2. Keep slowly buying (nibbles, not big bites) boring index funds and ETFS; boring, slow and steady
3. Keep saving cash (since I am nearing retirement, I too need 5 years of cash, I have 250k in cash, I think I need about 500k)
4. Turn off and tune out noise

[Tangler]

Personally I am staying the course. But I hate it, and I as I’m planning to go to semiretirement in one year, I would hate to go into that in the middle of a major market crash. But if I have to I will. I’ve prepared for it, will keep earning some money, and I’ve set aside 5 years of expenses in cash. I hope (and expect) that’s enough time for the markets to recover. We’ll see.

That said, a friend who is quite wealthy (and retired), ex-hedge fund manager, got out of the markets in December due to his perception that inflation was going to begin to hurt the markets as the reality sinks in that the Fed will have to rise rates. This was way before the current crisis. He is actively buying energy futures contracts for months out, believing they are not pricing in what he thinks is likely to happen. And buying gold and oil companies (not sure what kind), arguing that it’s unwise to take comfort in being out of the markets as inflation eats away at his wealth.

He may be right or wrong. He knows more than I do. Good luck to him. I am sure if I tried to take active measures my chances of doing worse in the long run would go up. Stories like his bug me, because they create the illusion that I ought to be doing something, and that if I did I might be protected, or at least better off. There may be some people who can be successful at this. The crucial piece is knowing whether or not you are one of them.

YES!
I hate it too!
I am in a very similar position.
I am close to retirement too and trying to build up that 5 year cash bucket as an antidote to SORR.

As for your ex-hedge fund manager friend, you cannot compare yourself to him. You are different animals entirely.

That is his thing. As a doc, you would be better off working as a doc a little longer than trying to dance in and out of the market or "buy energy future contracts for months out" or buy gold or oil companies.

No one knows how this will turn out. Not even him and he is a pro with training and an informational advantage.

Also, remember the hedge fund guy who lost the bet with Buffet about beating the S and P 500? Stay the course. Work a little longer if you must but don't try to get too fancy. I am in the fox hole next to you!

https://www.investopedia.com/article...-brka-brkb.asp

[Dusn]

I don’t see why this makes a difference.
A few months ago, at all time market highs, we should all have been worried that the CAPE ratio was very high, predicting lower market returns going forward.

So at the top of a bull market, IMO you need to have a bit of a savings cushion before retirement to mitigate lower expected future returns.

When the market is lower you need to save a bit more to make up for your losses.

Either way, in a bull market or a bear market, you’ve got something to worry about.

[Dont_know_mind]

Stories like his bug me, because they create the illusion that I ought to be doing something, and that if I did I might be protected, or at least better off. There may be some people who can be successful at this. The crucial piece is knowing whether or not you are one of them.

What's your friend's personal investing track record, it might be a lot worse than you think.
I guess in hedge fund land, you get a fee for selling a narrative or perceived value add.

I use myself as a contrarian indicator. I figure I am not too far from being the dumb money. By the time I hear about it, it's probably priced in. During the COVID bear market, when I was getting bearish, I had to tell myself to snap out of it, because I've fallen for that before.

Being an optimist has paid off well in the last 20 years. Just not worrying about it and taking risk has paid off. Maybe it was just luck and if things could have turned out differently.

Here's an interesting thing I read today. If you believe in market efficiency, that the market has priced in everything. From when you were born say, and the price of coffee takes into account how many you are going to drink during your lifetime to impute the likely price now (and everyone else's likely consumption in the current price). Does that mean, if you believe in hard market efficiency, you don't believe in free will ?

And if you don't believe in hard market efficiency, then you can get it right market timing, by being lucky. If there is a 50% chance of getting it right or wrong, then there's a 25% chance that you will be able to get out and back in right. So it depends on the payoffs and whether you think you're lucky. But likely not worth it in assets that have positive drift over time (tend to go up).