This might ruin your day if you're a pessimist

[jfoxcpacfp]

(or you believe bonds are essential in a well-planned long-term portfolio)

Why Does Pessimism Sound So Smart?

The links at the end ain't so bad, either...

[YYjames]

Johanna,

Appreciate the article. While fear has been selling since the beginning of time, there is thin line between "fear - get out/sell sell sell" vs "you absolutely need to do this becasue X can potentially go wrong"

Guess why are physicians targeted by FA, CPAs, accountants, lawyers etc ? Becasue they get sold fear.

Also while (probably) bonds may not be that great, lets be honest, equity markets have been declining. Don't want to get into MPT/index fund investment/boglehead (begs the question, if someone/WCI follows boglehead policy, its still someone else's MO people are following that markets have been going up for a century and will continue to do so, hence indexing makes sense - whats the guarentee? something about past performance not indicative of future...)

To all the readers: http://www.moneychimp.com/features/market_cagr.htm

Go plugin 1995 - 2005 CAGR

then plugin 2005-2016 returns in CAGR.

Yea. Expect low single digit returns if trend holds. If that is the case, do we really need advisors? DIY. Not a knock on CFP (or you Johanna) but why need CFP. Index it and expect those low returns.

Truth is good returns CANNOT be indexed. You make your business (what is WCI doing? this blog is generating more than his portfolio. Your Milestones Financial planning is generating more $$ ROI than stocks I bet) and you beat any kind of ROI. Yes survival bias but its the truth. Its the same as partner in practice, except us physicians take 124354656565378 times the liability and work 340349058305830 hours a week.

 

[jfoxcpacfp]

That's a nice calculator. I use the one at Political Calculations and reinvest dividends. The values are similar but not exact. The misstep, at least for most (in my estimation), is equating speculation and investing. True investing is carried out over the long term. Speculation is what causes people to stumble - and they don't realize the difference. Certainly, bonds belong in a portfolio as a tool to guarantee short term liquidity while earning more than a MMA. For the long term, there is no need to "smooth out" volatility as volatility is the driver of long-term growth.

As I asked Kon yesterday, when has a diversified portfolio of quality equities ever produced a permanent loss?

[YYjames]

Different matter in terms of permenant loss, you can await Kon's response.

Equities is betting that world will be a better place tomorrow than today because goods and services from companies will continue to drive standard of living higher. Hence should invest in companies to drive that growth.

However, what I am saying is we may be witnessing the first time when younger generation is poorer than prior based on just stocks. Not denying returns, just that they are LOWER and if trend continues will continue to be lower. Thats all. Everyone plan accordingly.

[jfoxcpacfp]

We may be - or we may not be. For sure, one is correct.

Everything is amazing and nobody is happy

Why I'm an optimist (rational optimist, that is)

 

[YYjames]

EXACTLY

Now we are getting to my point, which is investing is an individual thing. I consider this statement "hey invest in index fund! thats what boglehead taught me" equivalent to Eric Tait claiming "get into real state and rock". Neither is any better than another.

No one right method. Everyone do their due diligence.

And by that logic, extending a bit, why listen and follow media articles/FA/FP/accountatn/your friend/your whoever. Learn it. Experience it.

[jfoxcpacfp]

YYjames wrote:

EXACTLY

Now we are getting to my point, which is investing is an individual thing. I consider this statement “hey invest in index fund! thats what boglehead taught me” equivalent to Eric Tait claiming “get into real state and rock”. Neither is any better than another.

No one right method. Everyone do their due diligence.

And by that logic, extending a bit, why listen and follow media articles/FA/FP/accountatn/your friend/your whoever. Learn it. Experience it.

Click to expand...

I must confess your logic escapes me.

[The White Coat Investor]

Great article. Thanks for posting.