The Long Term Investor

I was working on my 2021 taxes last night. I have it done...except for a couple of important statements that I am still waiting for from Schwab. I have a pretty good idea how I am going to end up. I will be paying the government.....LESS than $1500. Last year I paid about $1000.

The numbers above are skewed by the fact that I got credit for the stimulus payments on my taxes that I never got in the mail in 2020 or 2021. So....in a normal year my income taxes owed will average about $3000 to $4000 TOTAL.

Prior to a couple of years ago....my annual income tax bill averaged between about $25,000 to $35,000 depending on the year.....once in a while higher. Back when I was working as a business owner it was usually higher than that range.....sometimes much higher. This range was the general income tax obligation that I owed each year since I retired from the business world at age 49.

Ok....so what......why am I posting this. WELL....it shows the importance of planing your income tax obligations in retirement. Everyone plans out their retirement......INCOME....very few people look at their retirement......INCOME TAXES. I quickly saw....in my early retirement...that income taxes were going to be a big factor for the rest of my life if I did not do something. So.....I did a lot of thinking before I hit age 59.5....as to how to structure my income and assets to MINIMIZE my income taxes in retirement.

One thing that I did over my entire life was to NOT put everything in tax deferred vehicles. Once I got enough in my Keogh Account that I felt my retirement was secure....I put most of our savings and investing money each year in a regular taxable brokerage account. I did not want to defer all my income taxes into retirement. Plus by investing in the brokerage account I could make my gains over the decades into capital gains rather than taxable income. In my brokerage account I can structure withdrawals and I am not required to take any sort of minimum distributions.

Another thing I did was I INTENTIONALLY choose to use up all my tax deferred accounts early in my retirement. I exhausted those account by age 70....rather than not touching them till age 72 and letting the money pile up in them.

The third thing that has saved me on my income taxes is the simple income annuities that I locked in for lifetime income. Much of the annual payment from each annuity is return of premium or principle. On that amount I dont pay any income taxes. It is like having a pension....but owing no income taxes on the majority of the pension payments.

The forth thing that i did is inherent in my investing style as a LONG TERM investor. I dont trade and I try to not sell unless I have to. So....I keep even my capital gains tax obligations to a minimum.

I have a sibling that I handle their investing account and their taxes. They are SHOCKED at how high their income taxes are in retirement. They are paying way more now for income taxes....and will every year for the rest of their life.....compared to when they worked. The bad news.....there is really nothing we can do at this point to change it. We made a few changes but there is nothing more we can do.

How you plan your retirement will vary for every person based on their individual situation. BUT.....I strongly advise planing for your income taxes as well as your income in retirement. There is nothing more IRRITATING than paying a BIG income tax obligation....for many people the highest in their lives....for your entire retirement.....year after year after year after year.

 

A short little real estate update on my local area.....Central Texas. Here in my neighborhood area of 4200 homes......the shortage of listings continues to be EXTREME. We still have ONLY 5 active listings.

In the past........at this time of the year.......we would usually see about 30-50 listings. We have been a HOT market for a while now....starting about 4 years ago....and going off the charts over the past 2.5 years. I really dont see this changing any time soon here in this local area.

 

Well yeah....but you own a bunch of commercial property Zukodany.....so you have lots of property taxes. If my taxes were not frozen (over age 65 benefit) my property taxes would be in the neighborhood of $22,000 just for our house. As it is they are about $12,500 being frozen.

BUT.....it is great to have hit the glory days from here on for our income taxes......these low rates started for us at age 70......after exhausting the final chunk of my Keogh Account which was rolled over into an IRA when I retired in 1999. The 2020 tax return was the first year of amazingly low income taxes. We will have these low rates for income taxes from here on.

It is no fun to get old....but I was looking forward to age 70....when the income taxes would start to be extremely low for us.

 

It definately helped us budget and plan out our retirement finances by having:

NO DEBT of any kind.

NO HOUSE payment.

NO CAR payment.

If we had a house payment it would probably be in the neighborhood of $4000 to $5000 for the house we are in. It is much easier to have a nice retirement income if you are not having to put out $48,000 to $60,000 a year on a house payment.

 

Well Mizugori....welcome to the board. Please continue to post and participate....and tell us about your investing experiences.

So your question....how someone could end up with higher taxes in retirement.

First....anyone that makes more income in retirement will have higher taxes.....not being factious....there are many people that are super savers in deferred accounts or simply pile up assets during a lifetime of working and saving.......or at some point cash in real property or other assets.....or other life happenings and events happen.......that gradually increase their income into retirement.

Someone might end up paying more in retirement if....they have bad timing....and the tax rates go up when they hit retirement.

Or another situation.....have you seen articles over the years of some person that is a janitor....and when they die it turns out that they have $5MILLION dollars?

Here are four examples just from my own family.

1. One of my kids and their spouse both work....good corporate jobs. They pile tons of money into both their 401K accounts every year to get it out of their taxable income....with a big company match. It is likely that when they retire...considering the compounding of that invested retirement money....and considering Social Security income....that they will be at or above their pre-retirement income.

2. My other kid and their spouse both work in government jobs. They have a very hefty pension that they contribute to. If they work 30 years each...they will draw 100% of their pre-retirement salary....as pension for life. Add in their Social Security that they will both max out in their lifetimes. Add in the dividends or interest from their taxable brokerage account that will compound to at least $2MILLION by the time they retire. (thanks for the help dad) Their taxes will likely be just as high or higher in retirement.

3. My sibling that I mentioned. Worked for the state (not Texas).....and never made more than about $50,000 per year max. They are now retired for the past 10 years. (These are real numbers from their tax file which is siting next to me on my desk right now.) Their income in retirement includes.....Social Security $23,102.....government pension which includes cost of living raises every year $35,000......they put money into deferred comp plan at work for many years......that money, which they were required to annuitize at retirement......produces another $9,400 of income per year for life. So we are already up to a retirement income of $67,502. Now add in the fact that they have an IRA with over $1.5MILLION from a lifetime of their brother (me) investing and managing their money......more income. We are already well above their highest working income.....and they have even more assets and income producing investments that I dont even have to mention. They are living at their highest and best level of their entire life in retirement....but they are also paying higher income taxes since their taxable income now totals about $140,000 per year.

4. OR....consider my mom and dad. My dad was a military officer....he retired in 1974 with about 25 years at age 50. I dont think he made more than $30,000 as an active duty military officer back than before he retired. (look at a military pay chart for 1974 under the rank Lt Col) Over the next 20 years his military pension got bigger and bigger from compounding of cost of living raises. He worked from age 50 till age 72 in a second job.....between the second job and his military retirement they probably had more income than when he was in the military. From the second job earnings he qualified for Social Security....more income. My mom was a very astute investor and inherited an account with 10-12 BIG CAP stocks from her dad in 1964. She kept reinvesting all the nice dividends every quarter for over 50 years in those BIG CAP household name stocks. By the time they were in retirement those stocks were producing about $40,000 in dividends every year....more income. Her one stock Phillip Morris was producing about $25,000 in dividends alone. My mom and dad while he was retired from the military but working in his second job put the max in an IRA for at least 15 years invested in stocks....more income as they had to take required distributions. They were super savers and investors.....the millionaire next door types. They definitely had significantly more income in retirement than pre-retirement and paid higher taxes.

There are many ways that income adds up in retirement......it just sneaks up on you.

 

I like and agree with this little article.

Why there's no need to fear a bear market

https://www.cnn.com/2022/02/06/investing/stocks-week-ahead/index.html

(BOLD is my opinion OR what I consider important content)

"New York (CNN Business) Stocks tumbled sharply in January and the market has remained choppy in February. There are worries globally about earnings, inflation, interest rates and Omicron. But some market experts think investors shouldn't be too concerned.

Why? Volatility is normal. And market corrections, defined as a 10% pullback from a recent high, are healthy and common occurrences during any bull market.

The Dow and S&P 500 briefly dipped into correction late last month before bouncing back. They are now within 5% to 7% of their record highs. The Nasdaq, which is loaded with tech companies, remains in a correction. It's about 14% below its peak.

Investors are undoubtedly on edge. The VIX (VIX), a measure of market volatility, is up more than 50% this year. And the CNN Business Fear & Greed Index, which looks at the VIX and six other gauges of market sentiment, is showing signs of Fear on Wall Street.

But a correction doesn't necessarily mean that an even worse pullback is coming. Few analysts are predicting a long, painful bear market ahead. That's when stocks drop more than 20% from recent highs.

"Corrections are a temporary setback for a long-term investment strategy, and about half of all corrections since 1966 have resolved themselves in less than five months," said James Solloway, chief market strategist at SEI's Investment Management Unit, in a report last month.

Solloway added that higher volatility does not mean there is a "high likelihood that we're heading toward a bear market or a recession in the near future."

"Ups and downs are a normal part of the investment cycle," he noted.

Even a portfolio manager who runs a fund that is hedged against big stock market swings isn't expecting a major drop anytime soon.

"This is a normal pullback," said Dan Cupkovic, manager of the Amplify BlackSwan Growth & Treasury Core (SWAN) exchange-traded fund.

Central banks have unnerved investors by signaling in recent weeks that they may hike interest rates more aggressively than expected in order to rein in rising inflation. But Cupkovic said that he expects inflation to cool off as the year progresses.

There should be "easy money for the next few years," he said.

Cupkovic also dismissed the argument that a bear market is overdue. That's because there was one two years ago, when stocks plummeted in March 2020 as the Covid-19 pandemic slammed the US economy. Before that, stocks had been soaring.

"It had been such a smooth ride for investors. Stocks went straight up. There was more complacency," he said. That's not the case now. The VIX is more than 60% above where it was trading at the end of 2019."

MY COMMENT

The greatest danger to the markets is people....investors. There is constant media fear mongering now.....24/7. It is just the modern way.....the new normal. If it gets too intense and people start to psychologically buckle to it......it can become a self fulfilling prophesy. I just do not get the feeling that this is happening right now. I dont know anyone....young or old.....new or experienced....that seems to be panicking. Now....the professionals.....yeah they run around in panic all the time.....of course all they are concerned about is mostly their extremely short term trading strategies.

Right now we are a bit past the middle of earnings reports. They are actually going well. When it is all done we will see the usual......FEW...... articles about how earnings beat expectations. Than, immediately....it will be all back to the usual doom and gloom. As long term investors....when you look back...you will see that you spent a lifetime IGNORING all the crap that is constantly put out there about business, investing, markets, the future, etc, etc, etc. When you look back...the vast majority of investing FEAR topics.....never happened.

 

I like this news since I happen to own the top stocks being mentioned in this little article.

Apple, Nvidia Lead List Of New Buys By The Best Mutual Funds

https://www.investors.com/etfs-and-...soft-as-new-market-uptrend-begins/?src=A00220

(BOLD is my opinion OR what I consider important content)

"Evoking memories of Carl Sagan, the best mutual funds scooped up billions and billions of dollars in shares of top growth stocks like Apple (AAPL), Nvidia (NVDA), Microsoft (MSFT) and Alphabet (GOOGL) in the latest list of new buys by top money managers. The money poured in just as a follow-through day flashed the start of a new uptrend on Jan. 31.

AAPL stock and NVDA stock both made the billion-dollar club, joined by powertrain and motor manufacturer Regal Rexnord (RRX). Apple led the latest report, taking in an estimated $2.4 billion. The best mutual funds also bet $1.4 billion on Nvidia and over $1 billion in Regal Rexnord.

MSFT stock just missed a seat at the billion-dollar table, attracting an estimated $984 million. Bank of America (BAC), Intuit (INTU), AbbVie (ABBV) and Mastercard (MA) each took in over $900 million.

With Alphabet having just beat on earnings and announced a 20-for-1 stock split, GOOGL stock also made the list. The search and cloud computing giant took in $206 million from the best mutual funds.

Nvidia Leads Semiconductor Sector Stocks

Joining Advanced Micro Devices (AMD), Broadcom (AVGO), Qualcomm (QCOM), Applied Materials (AMAT) and several others, Nvidia leads semiconductor sector stocks regrouping after the recent stock market correction.

The outlook for semiconductor stocks in 2022 remains positive, but supply constraints are expected to cap growth this year. That said, the best mutual funds have also placed bets on KLA (KLAC), Kulicke & Soffa Industries (KLIC), ON Semiconductor (ON), Diodes (DIOD), Xilinx (XLNX), SiTime (SITM) and more.

BofA, Mastercard, Schwab Lead Financial Stocks On New Buys List

Including regional and superregional banks, 67 banks made the list of new buys by top funds. Plus, three institutions classified as money centers — Bank of America, Morgan Stanley (MS) and Barclays (BCS) — also made the cut.

Further showing the strength of this area in the market, 45 other firms from the financial sector also bankrolled a spot on the roster.

Morgan Stanley pulled in roughly $500 million from the best mutual funds. Signature Bank (SBNY) ($481 million) and Charles Schwab (SCHW) ($386 million) also garnered large investments.

Top Funds Pump Money Into 14 Oil & Gas Stocks

With the Energy Select Sector SPDR ETF (XLE) soaring to new heights, it's not surprising that 14 oil and gas stocks make this list of new buys.

Coterra Energy (CTRA) leads the pack, taking in $824 million. Ovintiv (OVV), Cactus (WHD), EOG Resources (EOG), Diamondback Energy (FANG), Callon Petroleum (CPE) and Matador Resources (MTDR), among others, join Coterra.

More New Buys By The Best Mutual Funds

Showing the range and deep pockets of these leading money managers, Union Pacific (UNP), Deere (DE) and UnitedHealth (UNH) each attracted at least $500 million.

Along with UnitedHealth, Thermo Fisher Scientific (TMO), Pfizer (PFE) and West Pharmaceutical Services (WST) are among 27 names from the medical front on the list.

Dick's Sporting Goods (DKS) and 2021 IPO Endeavor (EDR) also negotiated a mention.

Microsoft, 10 Other Long-Term Leaders Among The New Buys By Top Funds

Institutional investors tend to take a longer-term view of their holdings. So it's no surprise that 11 stocks on the IBD Long-Term Leaders list have also secured a spot on the latest list of new buys by the best mutual funds.

Joining Microsoft and GOOGL stock on the list, you'll also find Thermo Fisher Scientific, Pool (POOL), Intuit and West Pharma.

Software stocks Atlassian (TEAM) and Fortinet (FTNT) also join MSFT stock among the Long-Term Leaders and new buys by top funds list."

MY COMMENT

I love it...since I happen to own these big name companies that are being bought up. I hope it is a situation of........."great minds think alike".......rather than......"fools rush in". These funds are using the latest weakness to LOAD UP the wagon.

 

A typical open today in the market neighborhood. At the moment we are backing off a little bit....but in general it is a normal open. Lots of things UP lately....crypto, the ten year yield, stocks, gold, silver, etc, etc.

 

I like this little article for the support it provides for long term investors......but for seniors in retirement......a small level of caution is still a good thing.

Can Seniors Have Too Much In Stocks?

https://www.servowealth.com/blog/can-seniors-have-too-much-in-stocks

(BOLD is my opinion OR what I consider important content)

According to the British Medical Journal in 1995, a 29-year old construction worker walked into an emergency room after landing foot-first on a fifteen-centimeter nail, which was sticking up out of the top of his construction boot. It had seemingly penetrated leather, flesh, and bones. Ouch. “The smallest movement of the nail was painful (and) he was sedated with fentanyl and midazolam,” powerful opioids and sedatives, the journal reported. Imagine the surprise then, when the nail was pulled out from below the boot and doctors found it had actually penetrated between the toes; the foot was completely unharmed!*

It’s not uncommon for us to make a big deal out of things that really aren’t. Sometimes it’s an individual situation, sometimes it is a circumstance that affects a large swath of the population. That is the case with older investors/retirees and their fear of the stock market; it’s as unfounded as a serious wound resulting from a nail that passes innocently through a shoe and past all appendages.

Stocks Too Scary For Seniors?

I was reminded of this fact after coming across a recent Wall Street Journal article titled “Seniors May Have Too Much In Stocks.” According to the article, the volatility in stocks this year “is sending a wake-up call to older Americans that maybe they shouldn’t invest like they used to.” Huh? Can you imagine altering your long-term investment plan because of some single-digit movements (which is to say nothing at all) in stocks over a few weeks? That 40% of investors at Fidelity between 60-69 have 67% or more in stocks, and 17% of Vanguard investors between 65-74 are 98%+ in stocks, is presented as a serious problem. As I will explain, it’s not.

I would normally write off articles like this as typically bad advice from the short-term obsessed financial media (for example, I managed to avoid writing about Morningstar's “Four Good Reasons To Sell Stocks” last week, which was published just prior to a +5% one-week gain on the S&P 500), but the WSJ article cites one of my favor authors, William Bernstein, in support of drastically reducing your exposure to stocks in retirement. Bill suggests, in line with the article's theme, the case of a retiree with $1,000,000 needing 5%, or $50,000 per year, that they hold no more than 50% in stocks (with the rest in bonds and cash).

50% or less. Wow.

There is a belief amongst financial commentators and advisors, even some “retirement researchers,” that stocks are so volatile, so dangerous, their declines so severe and long lasting, that were you to retire on the eve of one of these catastrophic events, you would be wiped out and your retirement busted.

It’s usually never revealed how infrequently we see serious bear markets in stocks, and never revealed that these bear markets—which can push stocks -30%, -40%, or -50%+ lower for a time—tend to happen very quickly and almost always recover fully in just a short amount of time. The fact that what is left from investing in stocks, after including these bear markets, is a much higher (than bonds/cash) long-term return that allows you to grow your portfolio principal in excess of your withdrawals in retirement, affording you the ability to take an ever-increasing amount of income to combat the vagaries of rising inflation, is completely ignored.

Don’t believe me, you say? Let’s look at the data.

Diversified Stock Index Returns...Better Than You Think

Dimensional Fund Advisors provides me data updated monthly on a series of well designed, globally diversified stock and bond “Balanced Strategy” index allocations with returns all the way back to 1973, almost a half-century. These allocations are representative of how we actually invest so it is a great data set from which we can model retirement scenarios and measure the true risk of stock-heavy allocations.

First, let’s observe the long-term returns of the various stock/bond allocations compared to inflation and the S&P 500.



The all-equity allocation, the “Equity Balanced Strategy Index,” compounded at a whopping +13.3% per year, over 9% a year more than inflation and over 2% per year more than the S&P 500 due to the benefits of global diversification and including an allocation to small cap and value-oriented stocks.

Returns drop noticeably as we begin to introduce bonds into the allocation. The 80/20 Index (80% stocks, 20% short-term bonds), earned almost 1.4% per year lower returns than the all-stock index. The 60/40 allocation almost 3%/yr lower returns. At the bottom of the table, the 20/80 allocation, which has far less volatility than the all-stock index, paid for this in the form of almost 50% lower returns.

Right away we see a few things:

First, the return on a well-diversified, all-stock portfolio in excess of inflation has been so high, it’s hard to imagine even the worst bear markets providing much friction in an effort to spend just 5% a year (plus inflation) of your savings.

Second, the diversified index approach is far better than putting all your money in just one segment of the stock market, like the S&P 500 (or the virtually identical Total Stock Index), as Vanguard would have you do.

Finally, as we add more bonds, the long-term returns drop precipitously, creating an ever-smaller spread between gains and withdrawals. This, as common sense tells us, is not good.

Simple math reveals that if you earn 13%, or 10%, or 8%, and only spend 5% per year, you are going to be OK. Stock returns don’t have to be anywhere near as high as they’ve been historically for diversified stock portfolios to represent great funding vehicles for retirees. If the spread between stocks and bonds is simply as wide as it’s been, which seems like a safe bet with interest rates still hovering at record lows while value, small cap and international equity valuations remain quite reasonable, stock-heavy and all-stock allocations win.

How About The Bad Times?

But what of these bear markets? A few have been devastating. Have they knocked the luster off stocks in retirement? Have more balanced portfolios with lower volatility/losses and long-term returns actually held up better?

Let’s see.

There were a grand total of five years of declines on the Equity Balanced Strategy Index between 1973 and 2010 (any more recent declines didn’t afford us enough future years to do a meaningful post-decline retirement simulation). That’s it, just five.

So the first lesson on losses is this: if you’re sitting around expecting a huge decline in stocks every few months or every year, you’re going to be waiting a long time. Over all 49 years, for example, through 2021, the Equity Balanced Strategy Index only declined nine times, and declined double digits for a year five times. That's a negative return in only one out of every five years (20%), and a loss greater than -10% in only one out of every ten years (10%). Only the most extreme nervous Nellies would be kept up at night.

What happened if we only look at retirements that begin during one of the five years when stocks had big declines between 1973 and 2010? To answer this question, I simulated an investor with $1,000,000 retiring at the beginning of each year—1973, 1974, 1990, 2002, and 2008–with a goal of drawing $50,000 per year, increased annually by inflation. I compared an investment in the all-stock allocation to the 80/20, 60/40, 40/60, and 20/80 allocations over the next 25 years (or as far as I could go, just 14 years starting in 2008).

The summary of the results: Not a single one of these “worst case” retirement scenarios saw the all-stock allocation end with less than any of the portfolios that contained bonds. Every time the end result was the more you held in bonds, the less you had left after withdrawals. That’s not safe.

In some cases, in fact, the portfolios most heavily invested in bonds were the ones on the verge of running out of money! It isn’t the all-stock or stock-heavy allocations that appear risky in retirement, it’s instead the allocations with more in bonds and less in long-term returns. The bear markets just don’t matter much after a while—the all-stock and stock-heavy allocations do drop more at first, but rebound faster and eventually come out ahead, sometimes dramatically.

You can observe all of the results in the table below, but I will focus on just two portfolios for commentary—the all-stock allocation and the 40/60 allocation which, if we are to believe Bill Bernstein and the WSJ article, is the best allocation for a retiree worried about a bear market and forced to sell 5% a year of their portfolio to live on.



The 25-year period starting in 1973 should keep all retirees up at night, it saw almost a -50% immediate decline on the S&P 500 coupled with a decade of over 6% per year inflation. All of the retiree boogiemen in one period? But look how well the all-stock allocation did! $1M grew to $13.8M net of withdrawals over the next 25 years, compared to just $2.8M in the 40/60 allocation. The only risk evident in this scenario was the loss of $11M in assets you could have had if you didn’t live in fear of short-term stock losses.

1974 started with the second half of the brutal 1973-1974 market, and it ended up unbelievably good for the all-stock allocation—an ending value of $31.2M net of withdrawals versus just $5.8M for the 40/60. Wow.

1990? Returns over the last few decades have been more muted, international stocks in particular have been disappointing. But retiring in the year of the 1st Gulf War and over 6% inflation didn’t change the result. The all-equity allocation ended 25 years later with $6.4M left after withdrawals, the 40/60 allocation had just $1.9M; at this point withdrawals were starting to make a serious dent in the bond-heavy portfolio’s remaining balance.

How about 2002 (followed too soon by 2008) and the tech collapse? Again, the all-stock allocation worked fine—by 2021 (just 20 years), the $1M had grown to $3M; in the 40/60 you had seen that balance drop to just $888,000, below the starting value as ever-increasing withdrawals were decimating the principal balance.

Finally, 2008; the worst year for stocks since 1931. Surely this period will put a dent in the prospects of the all-stock index as a retirement funding vehicle? Not so far. We only have 14 years since that brutal year, but the all-stock allocation is still performing better; $1M in the Equity Balanced Strategy Index net of withdrawals has grown to $1.3M (after spending a few months below $500K in early 2009!), while the 40/60 is down to $775,000. While the all-stock index lost a ton right away, it has slowly climbed out of its hole while never skipping a withdrawal, the 40/60 investor is probably starting to think about pairing back on withdrawals as the $50,000 adjusted for inflation has grown to over $66,000 in 2021.

Conclusion

The fact is, all-stock and stock-heavy allocations are more volatile and lose more in bear markets than portfolios that include large bond positions. But there’s no free lunch in investing—with lower volatility comes lower long-term returns, and possibly a return that is too low for you to achieve your long-term spending and legacy goals.

Instead of trying to "protect your principal" and avoid short-term losses in retirement, seniors should shift to thinking in terms of their long-term goals, how much it will take to fund them in the decades ahead, and the “purchasing power risk” they face if portfolio returns don’t keep pace with their spending needs. When you do this, you find that diversified stock portfolios represent as close to the optimal retirement funding solution as we have available.

And what of the unpredictable but inevitable bear markets? You may find that setting aside a few years of spending in a short-term bond fund might give you the confidence that you can weather the storm and won’t be forced to sell stocks at their nadir. The lower-return component will hurt your long-term wealth accumulating efforts, for sure. But when framed the right way, a small reserve fund may prevent us from giving into our fears of a plunging stock market and ensure we can hold on for greener pastures and the much higher long-term returns that stocks offer us. In the tables above, for example, the 80/20 allocation was never as successful as the all-stock allocation, but it was noticeably better than the 60/40 and certainly the 40/60 and 20/80 allocations.

Can seniors have too much in stocks? I can’t possibly see how."

MY COMMENT

The above is a great argument for the POWER of long term investing for any person.....especially those that are at least TEN YEARS from retirement. The great numbers above apply to any investor.....not just seniors or those that are retired.

A couple of things to consider.....however. The results above are DEPENDENT on the stocks or funds held. This data uses a diversified Index approach. This data will ONLY hold true if you owned the same investments as used in the examples. So individual stock picking is critical.

Second....the results assume holding through all markets and events.....something that is often hard for people to do. The results assume that you can avoid all the psychological aspects involved in investing.....a very difficult thing to do for many people.

As to seniors or those in retirement. OK.....this is nice data. BUT....you had better keep at least 3-5 years of money in some form of cash to ride out the bad time periods. You would also need to own the right investments....a very difficult task for many people. Being a great stock picker is very difficult. The above data uses a diversified Index.....something few investors do. You would also need to avoid all the psychological issues of investing and aging.

SO....food for thought and a good lesson for those that are not in retirement.....and....PERHAPS......good advice for a select number of retirees that have the ability to actually achieve what the data above shows.

 

On a day when the markets are generally UP here is a nice little long term investing article.

Staying in It for the Long Haul

https://americanconsequences.com/matt-mccall-staying-in-it-for-the-long-haul/

(BOLD is my opinion OR what I consider important content)

"The stock market has been all over the place recently…

But ups and downs are part of the investing game. And regular readers know how important it is not to get caught up in the day-to-day action.

Still, it’s important to understand it. And oftentimes, we can benefit from it.

So today, let’s discuss some of the most prominent recent headlines and what they mean for a long-term investor’s portfolio…

Headline No. 1
General Motors (GM) released its fourth-quarter results after the bell on Tuesday and announced record pre-tax earnings for the full year. The company also forecast earnings “at or near record levels” in 2022 as chip shortages ease.

McCall’s Call: General Motors continues to push forward with its aggressive transformation into an electric-vehicle (“EV”) business. The numbers have been impressive along the way – with record profit in 2021 and a projection for slightly better results this year and in 2023.

On a pure fundamental basis, the stock could be considered cheap with a forward price-to-earnings ratio of 7.5 and a price-to-sales ratio of 0.48.

Despite hitting an all-time high on January 5, General Motors is still down close to 10% year-to-date as the S&P 500 Index suffered one of its worst Januarys in a long time.

That isn’t too concerning, though. The future of transportation is one of the strongest megatrends of the decade, and the companies at the forefront of this trend will benefit massively. So periods of weakness represent great opportunities to buy into some of the legacy automakers such as General Motors and Ford Motor (F).

If these businesses are correct in their belief that the semiconductor supply-chain issues are likely to improve in 2022, their stocks should head back toward record levels in the coming months.

After discovering 40 1,000% winners, he just announced his favorite stock of the year.

Headline No. 2

After a huge year of growth, the U.S. economy is about to slam into a wall.

McCall’s Call: Don’t panic. This headline is complete B.S. But it’s one of many that are starting to worry the average investor.

The biggest problem with this headline is that it doesn’t tell the real story. Yes, growth this year will be slower than what it was in 2021. But there is a very simple explanation for that – COVID-19.

Remember that a large portion of the country was shut down in 2020, so growth in 2021 was obviously huge as businesses reopened and things began to move back toward normalcy. As a result, last year, the U.S. economy grew at its fastest pace since 1984. And if anyone expects that pace to continue, they’re completely ignoring logic.

Last year’s gross domestic product (“GDP”) growth of 5.7% was preceded by one of the worst declines in recent history – the GDP fell 3.4% in 2020. Now, most banks project GDP will grow 3.4% to 4% in 2022. Yes, that’s less than what we saw last year. But historically speaking, it’s still a fantastic number.

And more important… It is an impressive figure on the back of 2021’s insanely strong result.

Take a look at the chart below. The U.S.’s real GDP has climbed back to pre-recession levels at a time when corporate earnings are hitting new highs. That’s the true story, and the above headline fails to recognize that.


Remember folks… Headlines are meant to grab attention. They’re created with a “wow” factor – something that will make you click on them. They don’t give you the full story, and oftentimes they can be incredibly misleading.

So don’t let headlines like the one above scare you. Do your own research and make your own decisions. If you’re invested in strong, innovative companies that will grow over the long term, you can sleep easy at night no matter what the market throws your way.

And along those lines…

Headline No. 3

Tech and innovation stocks give up some gains.

McCall’s Call: The Nasdaq Composite Index climbed an unprecedented 7.5% in the three trading days leading up to Wednesday while the ARK Innovation Fund (ARKK) rallied 16.2%. Those are incredible numbers. So, while the recent pullback in tech-heavy trends may be a bit of a buzzkill, it shouldn’t come as a shock.


One-week gains like those put up by the Nasdaq and ARK Innovation Fund are not common. Short-term traders are taking advantage of that – selling into the strength to lock in big, fast gains.

For long-term investors, the big picture is what’s important here. Stocks are cheap right now, and all signs point to a much bigger rally that will last months and years – not just a few days. The recent action is just a taste of what’s ahead.

So again… stay cool, calm, and collected right now.

This year will continue to be volatile. Enjoy the rallies when we get them and take advantage of the periods of weakness. The hypergrowth megatrends powering the Roaring 2020s aren’t going anywhere but up."

MY COMMENT

YES.....I agree completely with the general information above. I AM NOT suggesting buying any specific stock listed above or any investing product mentioned above. The author mentions his products in the complete article.....which I edited out of this post. If you wish to see his products and newsletter information click on the link to see the full article.

 

So far....so good today. A completely normal market day.

 

YES....still a completely normal market day today....including.....the typical mid morning weakness and drop.