When would you feel safe going back into the market?

[Muschu]

Rick, I've been in cash since soon after the start of the GFC with the exception of a very small holding (just 150 shares) in RIO which I left as an experiment with the buy and hold principle. This was essentially to prove to myself that it was absolutely inferior to the trend following approach.

I knew I could only let it run if just a small $ amount was at stake, but thought I could do it regardless of what the market did. Not so. When my loss went through 10% that was it. Sold.

Had I been more fully invested I'd absolutely not have allowed such a loss before getting out.

Thx Julia. I also try to follow trends and this has kept me both in the market and out of it these past few years.
I'm OK with a loss as long as the win/loss ratio is around 50:50 BUT the % win needs to well exceed the % loss.
This has worked out OK and taken me essentially back to cash now. However I am very weary of the volatility and think your path has probably been an easier and, in hindsight, probably a better one. So well done!
The thread topic is interesting.
I think a real question for many retirees is if they will ever have enough confidence to re-enter the market.... I feel that pressure myself.
Anyway... We are very fortunate to live here and I have no complaints that are significant.
Regards
Rick

 

[Julia]

You could as easily say my path has been the laziest.
It has worked well for me. I prefer to avoid the stress of the volatility.

I'd feel perhaps quite differently if I were still working and if the capital didn't have the responsibility of generating a reliable living, but even then I'd probably still opt for the security of the known return.

 

[craft]

The thread topic is interesting.
I think a real question for many retirees is if they will ever have enough confidence to re-enter the market.... I feel that pressure myself.
Rick

Rick, Julia whoever else is thinking about this.

2030 Indexed government bonds are yielding 1.095% as of Friday.

A $60K income for 20 years at 1.095% requires a capital of over $1 Million even if you are prepared to consume the lot over that time frame.

Capturing higher real yields at some stage is a really big question especially for those that don't have enough capital saved to offset the low yields.

It’s a tough predicament that many may face and societies move to greater individual responsibility via defined contribution Super hasn’t been accompanied by community education.

 

[ROE]

Rick, I've been in cash since soon after the start of the GFC with the exception of a very small holding (just 150 shares) in RIO which I left as an experiment with the buy and hold principle.

In my opinion RIO is a bad stock to buy and hold long term.

1. It exposes to commodity cycle
2. It is a heavy capex business and required economy of scale
3. It expose to 1 type of commodity only and it's Iron Ore.
4. Low yield and will stay low yield because of number 2
5. During bad times it likely to tape on investors for more money again because of 2.

 

[Julia]

ROE, all good points. Maybe, subconsciously I chose a stock for my buy and hold experiment which I knew would be less than successful due to all that you've just outlined.

I doubt that I'm any exception to the truism that we seek to confirm our existing bias.

 

[stacks]

Rick, I've been in cash since soon after the start of the GFC with the exception of a very small holding (just 150 shares) in RIO which I left as an experiment with the buy and hold principle. This was essentially to prove to myself that it was absolutely inferior to the trend following approach.

I knew I could only let it run if just a small $ amount was at stake, but thought I could do it regardless of what the market did. Not so. When my loss went through 10% that was it. Sold.

Had I been more fully invested I'd absolutely not have allowed such a loss before getting out.

Hi Julia, you've been totally in cash since after the GFC? Thats quite a long time and quite a rally that has been missed. Although cash returns since soon after the start of the GFC may well be ahead of a lot of equity investors. And may be ahead of quite a few more soon...

Also quite a long time posting on a stock forum, when not owning stocks. I'm guessing its because you obviously have an interest in investing in stocks again? Do you plan on buying shares again given the volatility and uncertainty does not seem to have resolved itself?

What would you consider a signal that it might be a good time to buy again?

 

[Muschu]

Bit of a Catch 22 when bank TD rates are so poor. Fortunately I continue to do part-time consulting work which helps significantly.

 

[Julia]

Rick, Julia whoever else is thinking about this.

2030 Indexed government bonds are yielding 1.095% as of Friday.

A $60K income for 20 years at 1.095% requires a capital of over $1 Million even if you are prepared to consume the lot over that time frame.

craft, I don't have and have no intention of acquiring government bonds.

Capturing higher real yields at some stage is a really big question especially for those that don't have enough capital saved to offset the low yields.

I think you can pretty safely assume I've done all the calculations to ensure my income is considerably in excess of what I need when I make the decision to go to and remain in cash. I have quite a chunk earning 8%, another at 7%, another at 6% and then separately enough to live on for about three years, even if there were no money coming in during that time, at call at 5.5% having just been dropped by ANZ from 6%.

It’s a tough predicament that many may face and societies move to greater individual responsibility via defined contribution Super hasn’t been accompanied by community education.

Or perhaps community apathy? There's plenty of education out there if you take the trouble to seek it out. Lots to learn just on this forum.
Your general point is well made though. Having a reasonable amount of capital allows for much more flexibility in decision making.

Hi Julia, you've been totally in cash since after the GFC? Thats quite a long time and quite a rally that has been missed.

Hello stacks, yes the capacity to make more money during the rally is a point worth making. I reconsidered a few times but have become, I think, addicted to that money just landing in the a/c without any thought or effort from me.

I know many people never see an end to their quest to make more and more money.
I had a target derived from some pretty careful calculations about cost of living over X years, inflation, life expectancy etc, and - whilst I absolutely protect that capital - I don't feel compelled to increase it any more than happens at present via left over income. (Not sure if that is articulate enough to make sense?)

Although cash returns since soon after the start of the GFC may well be ahead of a lot of equity investors. And may be ahead of quite a few more soon...

We'll see. For people who haven't locked in rates they might find a greater drop in rates than we might have anticipated.

Also quite a long time posting on a stock forum, when not owning stocks. I'm guessing its because you obviously have an interest in investing in stocks again? Do you plan on buying shares again given the volatility and uncertainty does not seem to have resolved itself?

Sure. If there's a clear uptrend emerging. Even then I'd never be completely invested in equities. But if I could swap a 6% return from cash for more than that in yield plus franking credits plus some capital appreciation, yes of course I'd do it.

And I admit my continued presence on this forum is only partly to do with ongoing interest in things financial. I like the political and general discussion also.

What would you consider a signal that it might be a good time to buy again?

As above: a clear uptrend. I'm entirely happy not to attempt to capture the bottom (or the top for that matter).

 

[Ves]

craft, I don't have and have no intention of acquiring government bonds.

Julia, I don't think craft was suggesting that you were. He wanted you to think about the effect on your current term deposits of a falling long-term bond interest rate.

 

[ROE]

Hybrid bonds like Woolies provide very decent yield and I reckon as safe as government bonds unless you think Woolie goes belly up any time soon

WOW,WES,TAH bonds all good yield I consider fairly safe bond.

 

[StumpyPhantom]

Hybrid bonds like Woolies provide very decent yield and I reckon as safe as government bonds unless you think Woolie goes belly up any time soon

WOW,WES,TAH bonds all good yield I consider fairly safe bond.

This raises an interesting question. Assume a bear market for the next 5 years and global hyper-inflation. Where would you put your cash to work where it doesn't deflate like Mr Gaspo's balloons the day after a kid's party?

In these hybrid bonds?

 

[young-gun]

This raises an interesting question. Assume a bear market for the next 5 years and global hyper-inflation. Where would you put your cash to work where it doesn't deflate like Mr Gaspo's balloons the day after a kid's party?

In these hybrid bonds?

gold is your friend

 

[Ves]

gold is your friend

Can you fund your retirement with your portfolio in gold?

 

[stacks]

Hello stacks, yes the capacity to make more money during the rally is a point worth making. I reconsidered a few times but have become, I think, addicted to that money just landing in the a/c without any thought or effort from me.

I know many people never see an end to their quest to make more and more money.
I had a target derived from some pretty careful calculations about cost of living over X years, inflation, life expectancy etc, and - whilst I absolutely protect that capital - I don't feel compelled to increase it any more than happens at present via left over income. (Not sure if that is articulate enough to make sense?)

We'll see. For people who haven't locked in rates they might find a greater drop in rates than we might have anticipated.

Sure. If there's a clear uptrend emerging. Even then I'd never be completely invested in equities. But if I could swap a 6% return from cash for more than that in yield plus franking credits plus some capital appreciation, yes of course I'd do it.

And I admit my continued presence on this forum is only partly to do with ongoing interest in things financial. I like the political and general discussion also.

As above: a clear uptrend. I'm entirely happy not to attempt to capture the bottom (or the top for that matter).

Thanks for the reply Julia, I enjoy your posts. You seem to be in a good situation, Im sure lots of people would love to be able to live on cash interest. And if that provides what you need, then who needs the aggravation of todays volatility. Props to you.

There are however plenty of stocks with yields above 6%... but capital appreciation definitely doesnt have the same certainty as a trusty TD

 

[Julia]

Julia, I don't think craft was suggesting that you were. He wanted you to think about the effect on your current term deposits of a falling long-term bond interest rate.

If anyone would like to tell me about a strategy where my capital is guaranteed, the income is almost twice what I need to live on, and I don't have to care what the market is doing for the medium term future, I'd be delighted to hear about it

Thanks for the reply Julia, I enjoy your posts. You seem to be in a good situation, Im sure lots of people would love to be able to live on cash interest. And if that provides what you need, then who needs the aggravation of todays volatility. Props to you.

Stacks, you have it exactly when you raise 'the aggravation of today's volatility'.
I've been dead poor at one stage, struggled for many more years to attain a position of security, so feel justified at this stage in excusing myself from any unnecessary anxiety.

 

[craft]

craft, I don't have and have no intention of acquiring government bonds.

Julia,
The reason I mention the gov’t bonds is because it is an ‘Inflation adjusted’ return. If a person was buying a CPI adjusted annuity this rate would have a large bearing.

I think you can pretty safely assume I've done all the calculations to ensure my income is considerably in excess of what I need when I make the decision to go to and remain in cash. I have quite a chunk earning 8%, another at 7%, another at 6% and then separately enough to live on for about three years, even if there were no money coming in during that time, at call at 5.5% having just been dropped by ANZ from 6%.

I wasn’t refereeing to you personally. I’m sure you do have your situation in hand.
One important consideration I would mention is that ‘at call’ and Term deposits have reinvestment risk.

Or perhaps community apathy? There's plenty of education out there if you take the trouble to seek it out. Lots to learn just on this forum.
Your general point is well made though. Having a reasonable amount of capital allows for much more flexibility in decision making.

Average retirement payments are currently something in the order of $250,000 for men and $145,000 for women.
I disagree that societies move to greater individual responsibility via defined contribution Super has been accompanied by adequate community education.
I suspect that there will be people reading this forum and trying to educate themselves, feeling a touch overwhelmed at surviving on their payout for the next 20+ years.

So why I wasn’t commenting on your situation I was hoping that you and others with experience and understanding would participate in a constructive discussion around safety vs return.

 

[Smurf1976]

What would you consider a signal that it might be a good time to buy again?

For the market as a whole - p/e somewhere around 7 (as it typically ends up at the end of a secular bear).

For individual stocks - depends absolutely on the company and whether your reason for buying is T/A or fundamentals.

 

[ROE]

gold is your friend

if you own an ounce of gold for eternity you still end up with an ounce of gold.

own a business or a house for eternity you end up with a lot more business and houses
and in between you can buy as much gold as you want with cash flow...

Gold is only good as a metal to store value it, it doesn't generate wealth and have very little utility, many people use it making bling bling stuff

I know Graham Turner turn millionaire with travel business
I know Rod Jones turn millionaire with education business
I know of Graham Wood turn millionaire with accomodation business
I know Rupert Murdoch turn Billionaire with news and cable tv
I know of Frank Lowy turn Billionaire with Westfield mall

I never heard or read anyone who buy a few bars old gold and becomes millionaire

 

[Julia]

Julia,
The reason I mention the gov’t bonds is because it is an ‘Inflation adjusted’ return. If a person was buying a CPI adjusted annuity this rate would have a large bearing.

OK, thanks, craft.

I wasn’t refereeing to you personally. I’m sure you do have your situation in hand.
One important consideration I would mention is that ‘at call’ and Term deposits have reinvestment risk.

Of course they do. And that's why just a couple of days ago I moved a substantial amount that was at call when it dropped to 5.5% from 6% into term deposits in multiples of $50K. That allows more flexibility if there's a need before the term ends to cash out some of these funds.

I can't tell what will happen in a couple of years' time or five years. All I can do is assess what looks most likely given the present global and local situation and act accordingly. If I'm wrong and the market suddenly takes off I feel no compulsion to stick with the present course.

Average retirement payments are currently something in the order of $250,000 for men and $145,000 for women.

Yes, that's right, and this partly reflects the relatively short time Australia has had compulsory Super contributions, along with women's often interrupted employment history.
But imo it also reflects the apathy with which most people regard their super in that they don't take control of it. This doesn't necessarily mean having a SMSF, but just that they need to understand how it's invested and what their options are.
Plus take a wide interest in what's happening in the world.

I disagree that societies move to greater individual responsibility via defined contribution Super has been accompanied by adequate community education.
I suspect that there will be people reading this forum and trying to educate themselves, feeling a touch overwhelmed at surviving on their payout for the next 20+ years.

OK, so what should they do about it? Continue to feel overwhelmed and retreat from any effort to gain greater understanding about how to make money and retain it?
What I hear from such people over and over again is: "Oh, Super is just a con. I hate that I am forced to have money in it". This shows a complete lack of understanding that Super is merely a tax advantaged vehicle in which to invest, not an investment of itself. It's up to individuals to understand this and go on from there.

So why I wasn’t commenting on your situation I was hoping that you and others with experience and understanding would participate in a constructive discussion around safety vs return.

Always happy to so participate. But an important factor is one's stage in life.
Someone in their 30's earning a decent income is going to be able to take a whole different approach from a retiree who is generating all income from their capital.

I read posts from people who are 'averaging down' and think, hell, you wouldn't be doing that if you actually had to generate a living from your capital.
So we all have different requirements for different strategies for different reasons.

 

[xyzedarteerf]

if you own an ounce of gold for eternity you still end up with an ounce of gold.
I never heard or read anyone who buy a few bars old gold and becomes millionaire

I have heard of many instant millionaires who are penniless in just under a year . a fool and his gold are soon parted.