The Long Term Investor

I go with the mix of stocks and funds. Funds which hold stocks. Funds which hold bonds. A mix of mutual funds, ETFs, bond funds. Etcetera. Funds invested in areas I don't know much about, and hope that the find manager knows more than me, like emerging markets. Actually, if I know more than the find manager, that fund is in trouble. They should all know more than me.

And I hold. As the article reads - for years.

 

Funds are not the entire portfolio. They simply add diversity. Small enough percentage that I don't cry if they don't make a lot.

Let's say I have holdings in Boeing, Raytheon, Spirit Aerosystems, GE, GD, Lockheed Martin, Northrop Grumman...... A fund focused on defense contractors will hold a bunch of other defense companies. When OshKosh sells a bunch of new trucks, or whatever, I feel like I didn't miss out. It's in the fund. Or I've already made XXX amount in Spirit Aerosystems, they make Boeing's fuselage and Boeing isn't cranking out planes at the moment, I can sell it, but I still have a little piece in the fund.

Almost like spreading out my bets on roulette. You can reason that certain numbers on a certain roulette wheel, have a higher probability after 20 years of watching the table and charting. But the next spin is still not predictable.

Not keeping all my eggs in the same basket. Like last week when Intel went down, AMD and Taiwan went up. I reason that while the overall portfolio does not see the most gains, because I can't pick winners in advance; I don't suffer the big losses either.

I could sell everything, and let it all ride on Tesla.

 

No worries. Over time, everyone develops certain habits, and pattern a trading style. Which is why we don't all invest in the same way. That's why there are so many funds, with different managers, and they all have different results. Maybe I will never be Carl Icahn and not flinch losing a fortune on Hertz. Or Bill Ackman waging personal war with Herbalife. But I keep evolving. Changing.

I look at the market different, than from years past. Maybe as a young boy, I had different ideas of what the market can do, and what I could do with the market. I still have greed. Otherwise, I would quit. Liquidate and buy gold bullion to bury in my yard.

A wise man realizes his own ignorance. I will always be ignorant. I will continue to learn. The day I know it all; I buy a shovel and bury gold bullion in my yard. My front yard.

 

Here we are. An eclectic collective. The group grows. Each new member adds to, and evolves the sentiment. My nod to some of the new guys. They have turned my attention to what they are watching, and it's refreshing. Otherwise, we would just pat each other on the back, every day.

 

Always pins and needles. Do I load up on those stocks now? If I don't, the ship sails without me. I waited with Tesla, and the ship took on a little water. Pretty sure that Amazon and Alphabet did well during the quarter. The pandemic shutdown only boosted Amazon sales. Google doesn't appear to be hurting. Not so sure on Facebook. But nothing will matter of the market is still reacting to real world Corona Virus infection rates and US - China tensions. Or my cousin Fat Boy Kim throws another missile in Japan's direction. Maybe China will finally step up and take Taiwan back. Or India steps up and border troops throw some Chinese off the cliff. MBS may finally seize total power in Saudi Arabia. A lot "could" happen.

 

So this last week I reallocated my 401k portfolio:
50% - RGAGX (American Funds The Growth Fund of America R6)
45% - SSSYX (State Street Equity Fund 500 Index Fund Class K)
5% - VBILX (Vanguard Intermediate-Term Bond Index Fund)

I chose to reallocate my 401k FROM a mid cap s&p 500 Index fund for 90% and a bond fund for 10%. I have almost exactly $10,000 in my 401k right now. I am 25 and I except to be able to increase my contribution % each year as my income increases.

Also, I have been reading the forum long enough to know some of you may not agree with the bond fund but I guess Ben Graham’s Intelligent Investor rubbed off on me and I decided a small bond fund wouldn’t hurt.

I also just opened Roth’s for my wife and myself and funded with VERY SMALL deposits. Which I am planning on buying a few shares of SPY with tomorrow.

I would like to do something like what WXYZ advocates for and do 55%/45% split between stocks and funds. However, this is not possible with my 401k based on the nature of available investments. It also is not really possible in our Roth’s either because of the amount I have available to invest.

I also have a decent amount available for investment in my brokerage account, which is because I locked in some short term gains two weeks ago. The main reason I sold was because after reading the discussions on this forum I feel like a was cavalier in the companies I chose and want to invest in companies that I believe are better. I could invest with this cash but from a personal finance standpoint, it may be wiser to keep as extra emergency savings (I probably have 3-4 months of expenses saved without the amount in the brokerage account but this would put me closer to 6 months). I also contribute $50 monthly to an HSA account which is being invested in a s&p equity fund.

Again, I introduced myself a week or two ago but just as a reminder. I am a relatively new investor but I am looking to build long term wealth for myself and my family over the next 30+ years.

I guess my other concern with investing through my brokerage rather than using a Roth or traditional IRA is I lose out on tax benefits.

 

Bonds offer security to balance and round out your portfolio. I'm old school. We used to actually buy US Savings Bonds, and get a fancy redeemable certificate. Let's say that there's a crash in the market. Every stock goes sideways. Those bonds keep paying interest. Municipal Bonds. Treasury. Yeah, people scoff at the low rates. But what are the chances that those crash, lose half of their value, and interest payments are suspended? I see stocks on the market right now that have less than half their value, and dividends are suspended. Ford, GE, HSBC.....

 

i dont know how he ever started it/them. It is SO much info! More than my lazy ass can digest so frequently. And im sure there is a streamline he has put in place to filter over the yrs, but bigbear is a ridiculous good contributor! I love to check those sunday nights, pre market mondays and late week. Thats if nothing leads me to them in between as well.

 

It's interesting that so many people conflate bond funds with bonds. Bond funds can and do crash. Bonds can also crash in value but not with the same trajectory as bond funds.

One of our debentures (for the purpose of this post, I am equating debentures to bonds) lost 25% of it's value in March. We scooped a lot more of it when it was paying 13%. Now it's back over the February market price.

Bonds are only stable as long as the business is solvent and they are held to maturity. Even at that, not all bonds mature. Non-maturing bonds become extremely similar to equity.

The idea that bonds are a stabilizer you can sell into a down market at full price and use the cash to buy discount stock is a fairy tale that seems to be embraced by nearly everyone.

I like our bonds and debentures. They have treated us well but, in different market conditions, we would be 100% equity and I do not believe it would significantly change our risk profile.

 

Holy cow! Just logging in from my phone right now cause I don’t typically get to my desk until later in the afternoons. But I just thought I had to log in here right now to say how much of a pleasant surprise this was for me to read personally. Especially coming from what I feel is one of our most underrated and most appreciative person in the forum in @WXYZ. You rock sir!

I know I almost never post on this thread here, but truth be told here, I do try to read this thread daily. And really am appreciative of the great contributions you bring into Stockaholics on a daily basis @WXYZ seriously. Can’t say it enough, and I’m sure I speak for pretty much EVERYONE on this site when I say your market input and insights are HUGELY APPRECIATED from all of us here on Stockaholics!

We really need more people like you here imho. Thanks for all you do here.

And again sorry if I don’t post in this thread much at all. If I’m being completely honest here, I’m not really actively in the market right now. Not investing or trading. Largely just an observer nowadays. It’s not that I don’t have the interest or anything. Quite the opposite actually. I’ve just been super tied up with personally real life issues, and also very busy with work that really eats away at most of my time nowadays.

Still, I love talking about the market and investing/trading whenever I can though!

Thanks to you as well Brian (@B Russ) for your awesome words here as well! Missed you here the past few years. And was super excited when I saw you had returned and are now as active as ever, really ever since the HSM days haha.

And finally many thanks to Tormented for all he does on this forum as well. Thank you so much for pinging me here or else I would have completely missed @WXYZ post!

Keep up the great work everyone!

Wow I cannot believe I actually typed all of this out from my little phone lol. Yikes! Catch up with you all soon. Hope you guys are all having a great summer!!

 

Thanks for all you do, bigbear0083.

Back to bonds. Those who carried bonds as a stabilizer for crash events, here's a look into that reality.

To be fair, they would have had to sell bonds at a 12% loss and would have been able to buy stock at up to 50% discount, so it may well have been a good trade. Couch potato and other strategy evangelize bonds but none of the scenarios I've run show bonds to be particularly advantageous, outside of a ladder. What's more, bond gains are low enough that they don't outstrip losses during an event so you'd be better off in cash.

 

I have a lot of respect for your position, WXYZ.

Suffice to say, I do not come from money. When I was very young, my parents couldn't afford to feed us. I didn't realize anything was wrong until I was a teenager and an older brother told me that's why we used to go to my aunt's house all the time to eat. When he said that, it hit with the impact only possible with the revelation of an undiscovered truth.

Needless to say, they weren't very financially savvy. My Mom taught herself how to invest, in parallel or just a tiny bit after me. She and I do not share the same philosophies, but I have huge respect for her approach. It is working, her only means of support, and she has done a lot with a tiny amount of money.

In some ways, being a completely blank canvas was an advantage. I do wish someone had pulled me aside and said, "Look... this is how you do it and these are the traps to avoid." I'm not sure it would have done a ton of good, though. We all need to learn certain things for ourselves.

 

Evening all.
I’ve been reading a lot of these threads from afar for the last few weeks ... just registered so I can post.
Completely novice in all of this.. been dabbling since middle of last year and doing ok so far (circa 7-9% up on overall portfolio) ( that may be crap !)
But TomB16 your words just really resonated.
Where would I be best to find out ‘this is how you do it and traps to avoid’ !??
I’m a working mum to young family.. doing this in spare time to try and earn some extra money- so don’t have loads of time but do really enjoy it. Just want to learn.
Appreciate any tips or resources you can point me in direction of.