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Old 13.07.2018, 10:18
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Re: Are you happy to lose 50%-80% of your wealth?

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Pretty easy
1. not having 100% of your wealth tied up in stock market while nearing retirement
2. geographical diversification
3. gold
1)Seems like a poor strategy as death & retirement will be 30 years plus apart. Nobody in their right mind would buy an annuity so being invested in global equities will likely do best over the long hall.

3)Gold produces zero income & does not grow organically so hardly something to bother with. It's not been a good store of value over the last 10 years either.
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Old 13.07.2018, 10:43
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Re: Are you happy to lose 50%-80% of your wealth?

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1)Seems like a poor strategy as death & retirement will be 30 years plus apart. Nobody in their right mind would buy an annuity so being invested in global equities will likely do best over the long hall.

3)Gold produces zero income & does not grow organically so hardly something to bother with. It's not been a good store of value over the last 10 years either.
Even better, buy one or more business, let someone in charge, get some % of the earnings and so... So, if you ever feel bored, you can go to work or do something related
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Old 13.07.2018, 10:47
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Re: Are you happy to lose 50%-80% of your wealth?

In my opinion it's all about managing different risks. You cannot escape risk. I have most of my wealth in the stock market (some funds, mostly individual stocks as I'm trying my hand at value investing).

Cash - foreign-exchange risk, inflation
Stocks- market risk (price change) mostly
Bonds - interest rate risk (central bank interest rate goes up, yields go up (i.e. bond prices go down).
Commodities and precious metals - market risk

If you're investing in the stock market and a net buyer of stocks, it's the moments when the market crashes that are amazing opportunities. You can pick up great stocks at dirt cheap prices just because everybody is panicking and trying to sell them, for no better reason than 'they fell so they'll keep falling'. Stocks can be treated as 'earnings machines'...if you can buy an earnings machine at a super cheap price (let's say 10% earnings yield), and are confident those earnings will continue (think big corporations like J&J, Apple, P&G, ...) - then 'get out the bucket, not the thimble'

Great books to read: The Intelligent Investor by Ben Graham (still the best book on investing), and Irrational Exuberance by Robert Shiller.
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  #44  
Old 13.07.2018, 10:57
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Re: Are you happy to lose 50%-80% of your wealth?

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I am talking purely about the clickbait title. Whether they accept it or not, no-one is "happy" to lose over half of their wealth.
title should have read are you happy to risk losing... though hopefully the meaning is clear to most people from the context of the body of the post. in other words: are you happy to risk losing the money, if not what measures do you take to mitigate that risk?
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  #45  
Old 13.07.2018, 11:03
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Re: Are you happy to lose 50%-80% of your wealth?

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title should have read are you happy to risk losing... though hopefully the meaning is clear to most people from the context of the body of the post. in other words: are you happy to risk losing the money, if not what measures do you take to mitigate that risk?
I think the ability to not be happy, but be emotionally separated from the 'loss' that you've taken in order to observe where you are and make the best decision for the future, is the real test that separates truly successful investors from the rest... and the ability to prevent recency bias and not extrapolate recent events into the future...as much as possible!
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  #46  
Old 13.07.2018, 11:36
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Re: Are you happy to lose 50%-80% of your wealth?

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If you're investing in the stock market and a net buyer of stocks, it's the moments when the market crashes that are amazing opportunities. You can pick up great stocks at dirt cheap prices just because everybody is panicking and trying to sell them, for no better reason than 'they fell so they'll keep falling'.
This is true, but with a caveat: you need to have cash on-hand to take advantage of the buying opportunities. For me personally, it can be a tough call between wanting my money to be working for me at all times (meaning being close to fully invested) and keeping a cash-reserve to take advantage of buying opportunities. In 2007/08, I had a lot of cash on hand and was able to buy up a lot. These days, I'm pretty close to fully invested, so if the market dropped, I wouldn't be able to take advantage.
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  #47  
Old 13.07.2018, 11:38
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Re: Are you happy to lose 50%-80% of your wealth?

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This is true, but with a caveat: you need to have cash on-hand to take advantage of the buying opportunities. For me personally, it can be a tough call between wanting my money to be working for me at all times (meaning being close to fully invested) and keeping a cash-reserve to take advantage of buying opportunities. In 2007/08, I had a lot of cash on hand and was able to buy up a lot. These days, I'm pretty close to fully invested, so if the market dropped, I wouldn't be able to take advantage.
Then it's time to increase your cash position to say 10%, you have profited over the last 10 years.
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Old 13.07.2018, 11:48
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Re: Are you happy to lose 50%-80% of your wealth?

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This is true, but with a caveat: you need to have cash on-hand to take advantage of the buying opportunities. For me personally, it can be a tough call between wanting my money to be working for me at all times (meaning being close to fully invested) and keeping a cash-reserve to take advantage of buying opportunities. In 2007/08, I had a lot of cash on hand and was able to buy up a lot. These days, I'm pretty close to fully invested, so if the market dropped, I wouldn't be able to take advantage.
It's the same for me regarding the tough call... I also keep some intermediate term corp bonds to reduce volatility and get a bit more yield than cash, while waiting for opportunities, then I can switch it out to stocks when I find something.

Buffett has around 116 billion in cash in Berkshire Hathaway at the moment while waiting for an opportunity so we're not alone
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  #49  
Old 13.07.2018, 11:51
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Re: Are you happy to lose 50%-80% of your wealth?

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Based on the media reports each day in the build-up, I think so few people thought the vote would go the way it did that they didn't realize they were playing roulette. In hindsight one can say gosh, I should have done what Phil did!!
To be honest, I wouldn't have put money on it either. But essentally if you want to succesfully play the markets, you need to cater for both both the likely and for the less likely.

I have in the past made some smaller but not insignificant amounts by buying at rock bottom prices stocks in companies that at the time lloked like no hopers. The thing being that if a stock is virtually wortless, it doesn't take much to double or even triple its value.
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  #50  
Old 13.07.2018, 11:58
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Re: Are you happy to lose 50%-80% of your wealth?

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It's the same for me regarding the tough call... I also keep some intermediate term corp bonds to reduce volatility and get a bit more yield than cash, while waiting for opportunities, then I can switch it out to stocks when I find something.

Buffett has around 116 billion in cash in Berkshire Hathaway at the moment while waiting for an opportunity so we're not alone
That is why I am stocking up on BRK stocks since I am sure when that 100+ Bln$ will be put to use, it will be put to good use.

This way I do both: stay close to fully invested AND be ready to take advantage of a crash.
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Old 13.07.2018, 11:59
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Re: Are you happy to lose 50%-80% of your wealth?

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This is true, but with a caveat: you need to have cash on-hand to take advantage of the buying opportunities. For me personally, it can be a tough call between wanting my money to be working for me at all times (meaning being close to fully invested) and keeping a cash-reserve to take advantage of buying opportunities. In 2007/08, I had a lot of cash on hand and was able to buy up a lot. These days, I'm pretty close to fully invested, so if the market dropped, I wouldn't be able to take advantage.
Yes, and this isprecisely what accelerates a crash. People believe a prediction about a crash and sell up so as to be able to buy back when the stocks are lower. Doing that actually causes the value to go down.
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  #52  
Old 13.07.2018, 12:25
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Re: Are you happy to lose 50%-80% of your wealth?

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That is why I am stocking up on BRK stocks since I am sure when that 100+ Bln$ will be put to use, it will be put to good use.

This way I do both: stay close to fully invested AND be ready to take advantage of a crash.
He will always hold 50 billion in cash for insurance claims, even 50 billion won't make a huge difference as he has hugely underperformed Fundsmith over the last 5 years.
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Old 13.07.2018, 12:30
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Re: Are you happy to lose 50%-80% of your wealth?

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1)Seems like a poor strategy as death & retirement will be 30 years plus apart. Nobody in their right mind would buy an annuity so being invested in global equities will likely do best over the long hall.

3)Gold produces zero income & does not grow organically so hardly something to bother with. It's not been a good store of value over the last 10 years either.
1)
No. Being 100% invested in stocks does not guarantee the highest success rate for retirement. Read here:
https://earlyretirementnow.com/2017/...ty-glidepaths/

3)
https://www.justetf.com/ch-en/etf-pr...1593&tab=chart
Switch to 10y. Doesn't look that bad to me.

You get bonus points for doing a backtest on a portfolio consisting of 100% stocks (your choice) and 80%/20% stocks/gold.
https://www.portfoliovisualizer.com/...nalysisResults
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Old 13.07.2018, 12:35
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Re: Are you happy to lose 50%-80% of your wealth?

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1)
No. Being 100% invested in stocks does not guarantee the highest success rate for retirement. Read here:
https://earlyretirementnow.com/2017/...ty-glidepaths/

3)
https://www.justetf.com/ch-en/etf-pr...1593&tab=chart
Switch to 10y. Doesn't look that bad to me.

You get bonus points for doing a backtest on a portfolio consisting of 100% stocks (your choice) and 80%/20% stocks/gold.
https://www.portfoliovisualizer.com/...nalysisResults
I don't go with standard practice as I retired at 52 & have more than doubled my assets over 5 years by being in www.fundsmith.co.uk

Look at Gold going back to 1979 if you want to see what an appalling long term investment its been.

$10,000 in S&P 500 income reinvested since 1942 is $51,000,000 v $400,000 for gold. http://www.businessinsider.com/warre...returns-2018-5 The longer your going to live gives you the strongest argument for a high stock allocation, Warren Buffet is 99% invested in 1 company although he has not retired.

EDIT In 2013 gold underperformed the stock market by 60%, I don't see any period that it out performed by more than 40%. From 1942 under performing by 99% should be enough of a red flag.

Last edited by fatmanfilms; 13.07.2018 at 13:00.
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Old 13.07.2018, 12:43
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Re: Are you happy to lose 50%-80% of your wealth?

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That is why I am stocking up on BRK stocks since I am sure when that 100+ Bln$ will be put to use, it will be put to good use.

This way I do both: stay close to fully invested AND be ready to take advantage of a crash.
Absolutely, and BRK is a great vehicle in switzerland with no capital gains tax. Even if he matches the S&P500, you’ll have paid no tax as it pays no divis.

Although Buffett’s alpha will likely be very low in the future. It’s too big, he basically expects to only perform on par with the market now. You can bet he’ll put that cash to good use when the time comes though.
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Old 13.07.2018, 12:47
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Re: Are you happy to lose 50%-80% of your wealth?

Based on what many pundits think it would seem to me that there is an increasing risk of holding wealth in anything that is denominated in fiat currencies.
That leaves real estate, agricultural farms, participation in industrial companies (but not shares), works of art and physical commodities.

Did I leave anything out?
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Old 13.07.2018, 12:48
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Re: Are you happy to lose 50%-80% of your wealth?

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Absolutely, and BRK is a great vehicle in switzerland with no capital gains tax. Even if he matches the S&P500, you’ll have paid no tax as it pays no divis.

Although Buffett’s alpha will likely be very low in the future. It’s too big, he basically expects to only perform on par with the market now. You can bet he’ll put that cash to good use when the time comes though.
Berkshire has paid tax on all dividends it's received so it's at a disadvantage to US EFT's to most investors.
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Old 13.07.2018, 12:51
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Re: Are you happy to lose 50%-80% of your wealth?

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Based on what many pundits think it would seem to me that there is an increasing risk of holding wealth in anything that is denominated in fiat currencies.
That leaves real estate, agricultural farms, participation in industrial companies (but not shares), works of art and physical commodities.

Did I leave anything out?
cryptocurrencies?

but aren't real estate, farms, companies, works of arts and commodities also denominated in fiat currencies?
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Old 13.07.2018, 12:53
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Re: Are you happy to lose 50%-80% of your wealth?

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Look at Gold going back to 1979 if you want to see what an appalling long term investment its been.
Wrong.
You did not do a backtest, did you?

Here you go.
Portfolio 1: 100% us stocks
Portfolio 2: 80% us stocks + 20% gold , rebalanced annualy
you-happy-lose-50-80-your-wealth-backtest.png
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Old 13.07.2018, 13:00
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Re: Are you happy to lose 50%-80% of your wealth?

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Berkshire has paid tax on all dividends it's received so it's at a disadvantage to US EFT's to most investors.
Won’t BRK have generally received them at a lower tax rate to the average Joe though?
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