The Long Term Investor

I looked at my primary account today. At the moment I am at (-1.97%) year to date. NICE to be ahead of the SP500. I also looked at the the money I invested about October 4, 2019. That money is STILL positive by slightly over $60,000. SO......all in all not too bad. I DO expect more strength at the open tomorrow and a mid day fade to the negative. I would not be surprised to see us down another 500 to 1000 points by the end of the week. I HOPE the markets fool me to the positive.

 

Well SUNSHINE......only you can really answer that question. I do not know your situation, your holding period, your investment philosophy, your money situation, your assets, your risk tolerance etc, etc. BUT......if it was me I would probably go ahead and buy whatever it was that I was interested in. I might wait till about 12:00 to 1:30 to see if there was a drop today.

BUT, I AM NOT a market timer. It does not work. I would probably figure that a drop of nearly 2000 points was enough to tempt me to buy. BUT......that is me. It would NOT bother me to buy and have to sit through further down days ahead. I generally believe the research that shows that doing a buy ALL IN ALL AT ONCE will beat dollar cost averaging. YOU might prefer.......in a panic atmosphere with things unsettled......to filter in your money over the next three to five business days.

If I had stock market money that was intended for stocks or funds regardless of this little DROP........and it was long term money (at least ten years).......it would not bother me in the least to buy today.

If you wish......what are you thinking of buying?

 

I will comment.....in my investing I STRONGLY prefer to hold the BIG CAP, SAFER, end of the markets. I DO believe that the sort of stocks that I always buy.....BIG CAP, MAJOR CORPORATIONS, WORLD WIDE MARKETING, ICONIC PRODUCT, LEADERS IN THEIR FIELD AND THE GENERAL WORLD ECONOMY, DIVIDEND PAYING, GREAT MANAGEMENT, etc, etc......give me a little bit of an extra measure of safety in a panic or fear driven situation or for that matter in a nasty BEAR market. They also give me nice dividends to reinvest in down time periods and especially longer term bear markets. When the SUN shines again on the markets, all those reinvestments always PAY OFF.

At least to this point in my life, I have been able to get great returns and compound a lot of gains with this sort of investing. At the same time, I do believe, there is safety and more stability in HOUSEHOLD NAMES when it comes to individual stock investing. This is why my portfolio contains what it does. I want the potential for good growth, dividends, and a reliable PROVEN business. I want to know that what I hold is the BACKBONE of the AMERICAN economy and by extension, the world economy. Owning these sorts of businesses gives me the confidence and ability to hold for the long term through the worst bear market (years) if necessary.

The mutual funds that I hold are based on the same philosophy....besides the fact....that they are long time STELLAR funds. As a 100% fully invested stock investor all the time for the long term, this is one way I try to lessen the risk a little bit and it fits my personality and risk tolerance PERFECTLY. I have been doing this for a long, long time in the same fashion and using the same philosophy. I know myself as an investor very well and that is one reason that little moments of FEAR&PANIC, DOOM&GLOOM, do not phase me in the least.

In the investing business there is a SUITABILITY rule........know your customer:

"FINRA Rule 2111 requires that a firm or associated person have a reasonable basis to believe a recommended transaction or investment strategy involving a security or securities is suitable for the customer. ... Brokers must have a firm understanding of both the product and the customer"

WELL.....I have been my own advisor and done my own investing for a long long time and I know my customer.......myself......very well. I STICK with what I do, how I do it, nothing more, nothing less.

 

One BIG DIFFERENCE with this little drop that I am seeing at the moment......at least in my world......is the lack of talk about moving money into GOLD or SILVER. Personally I do NOT consider either one an investment vehicle. I prefer investments like stocks and funds that have inherent ability to provide growth through compounding. I DO own some gold and silver. NOT as an investment, mostly as a personal curiosity.

At the moment I have about 1200oz of silver and 16oz of gold. We give each of our children and their spouse a Silver Eagle 1oz coin for each birthday and Christmas every year. We have been doing this for so long it is a family joke.......where is my silver coin? My parents did this with my sister and me.......and that got me started on buying a few rolls of Silver Eagles every year. A few years ago I switched to buying a couple of Gold Buffalo's (1oz USA issued pure gold coin) each year instead of the Silver Eagles.

Of course, these items DO HAVE monetary value and are a very small part of our asset mix. BUT....they are NOT intended as an investment or a hedge against stock market risk. As I have said in the past......our asset mix is.....at the moment.... composed of FOUR INTENTIONAL categories:

Stocks and Funds
Real Property (our free and clear home)
Personal property (art, antiques, gold, silver, etc)
Income Annuities and Social Security

I had not thought of it BUT I guess this little panic induced semi-correction and the DROP in Treasury yields has made our Income Annuities much more valuable.......at the moment. NOT THAT we can realize any of that gain. I am very glad we purchased the....INCOME..... annuities when we did.

WARNING - when I talk annuities, I am talking about simple.....Income Annuities. I WOULD NEVER purchase any of the other sorts of annuities that are SOLD to people as investments, life insurance, and other sorts of vehicles. The......BAD....annuities.

 

GREAT......looked at my primary account a few moments ago. Yesterday at the close I was down (-1.97%) year to date after the sell off (see post 823). TODAY at the moment I am UP +1.92% in my account. This does not include my mutual funds which will post after he close today. BUT...taking gains in the funds into account assuming we continue positive for the day till the close.......I am NOW....for this brief moment.....back to POSITIVE year to date.

NOT TOO BAD....considering all the PANIC&FEAR and DOOM&GLOOM that is rampant lately. A BRIEF GLIMMER OF HOPE. BUT....I do expect to see many down days as the this virus "stuff" plays out in the MEDIA.

 

WOW.....something going on with this site. An entire page of posts has disappeared.

 

Yes, everything that was on page 43 is gone. A post by RG about Boeing. My reply about Boeing. A post to Sunshine about the rest of this week being down especially Friday. And others. All were done yesterday afternoon. No need to look through the thread, they were the last 4-7 posts.

I guess the virus got them.

 

EVENTS like today just DRIVE ME CRAZY. I just cant stand IDIOCY. We are getting to real PANIC mode now. NOTHING has really changed since yesterday BUT the media coverage is RAMPED up big time on the fear and panic language today. I really dont care about the markets. They will take care of themselves over time.

As I said yesterday in one of the MISSING posts......

I would NOT be in a hurry to buy anything right now. Today is going to be down. Tomorrow is going to be down based on this little panic and the fact that traders and short timers will not want to be holding anything over a weekend. The news curve is for more and more panic language and sensationalism. If I was going to buy something, I would probably hold off for at least a week or two.

We are EXPERIENCING pure human reaction as we have seen all through history. Rationality and reason are irrelevant. As usual I will continue to be fully invested for the long term.

 

A FEW random comments:

This "little" event is one reason I DONT DO International investing. When markets are being impacted by any sort of erratic or irrational event I WANT to ONLY be invested in the largest, most successful economy in the world. I WILL NEVER invest in emerging or third world economies and this little event should be a warning to anyone that invests in those countries.

For those in early retirement......this event is the sort of thing that can really hammer your accounts in early retirement. What makes it bad is the fact that after losing 10% or 20% or 25% it is inevitable that most people will sell out in fear and panic as they see 15% or 20% or more of their retirement funds disappear in one year. As I have said in the past we are in the middle of a HUGE experiment in retirement funding and planing. We now have virtually the entire USA, except for government workers, NOT covered by any sort of pension. The average person has NO CLUE how to use and preserve those funds for a 15, 20, 30 year retirement. The lesson which is too late for many is......PRE-RETIREMENT planing is CRITICAL. THIS is why I have totally divorced my retirement income and those of my family from my stock accounts. I WILL be a LONG TERM, fully 100% invested investor for the rest of my life. I can ONLY do this if I am free from emotion based thinking. By isolating my stock accounts from personal need I am able to sit back and watch current events and NOT feel the compulsion driven by fear and panic.

 

HERE is a little article for those that are NOT in panic mode.

Opinion: Do this one thing before you react to the stock market’s losses

https://www.marketwatch.com/story/d...stock-markets-losses-2020-02-26?mod=home-page

(BOLD is what I consider important content)

"The phone is ringing off the hook. The stock market is down significantly, and everyone wants to have answers. The only thing for me to do is dig in and talk to every client. Was this Monday? No this was Monday Sept. 29, 2008.

Over the course of a 30-year career working with clients, I have seen several radical gyrations of the stock market. Everyone wants to do the right thing for their future, including make money. Losing money does not feel good. Today I know the question “What should I do?” is on everyone’s mind.


Here are the questions you need to ask yourself:


• Do I have cash for your immediate needs?


• Am I looking to sell for the sake of action and control?


• Do I know how my portfolio has done in the long term?

If you have a good investment professional helping you, you may have heard from them. Markets like these are where they earn their money. If you do not have a professional planner, here is what many planners say when they call clients:

• Review your portfolio and investment strategy.


• Don’t panic; instead, be strategic with any action.


• Consider whether this is a buying opportunity: The old adage “buy low and sell high” may apply.

No matter how good an investment person is, remember that no one knows the future path of benchmarks like the S&P 500 index SPX, -3.47% . If you are in the stock market, you need to be thinking long term. Money in the market means you do not need it for more than seven years. Any shorter-term money should be in bonds and cash.

Let’s look at the information you need for today whether you have a planner or not. Even though history does not predict the future, what perspective does tell us is the stock market goes up and down. As short-term thinkers, we happily remember the market of the past 10 years with its long bullish ride up. Teasing apart the details of the past:

• A year ago, the Dow Jones Industrial Average DJIA, -3.52% closed at 26,091.95 on Feb. 26, 2019.

• Just over 10 years ago, on Dec. 31, 2009, it closed at 10,428.

Yes, Monday and Tuesday were the worst two-day slide in four years, and it feels bad in the moment. Historical drops are best evaluated by percentages, not the actual points number of the slide. Read this to get some historical context about stock-market moves.

Is this recent significant slide because of the coronavirus? There is a good chance that is a piece of the puzzle. Yet, there are other factors in play. That is where you holistic view comes in handy. Look at what you need and want. If you sell and go into bonds, your yield is lower now than a week ago. If you sell and go into cash, your money will be safer. Having cash is always important. Having too much cash prevents you from missing out on future gains.

Don’t do something just for the sake of doing it. Reacting may cost you more in the long run. Also, reacting and making a change from a place of panic typically does not good decisions make. When the market slid after 9/11, I called Sam and Elaine, clients to whom I gave hourly advice on their discount brokerage account but did not manage their money. As their Certified Financial Planner, we met semi-annually for our investment check-in. When I reached them in Florida at their retirement home, he was distraught.

“I am tired of losing money,” Sam said. “I am switching to another advisor.”

The market had been down 20%. The client portfolio was down 8%. This was good planning as a result of a conservative portfolio in his and his wife’s first years in retirement. As much as I explained to him, with his wife listening in, that they should take the time to review closely their portfolio, he wanted to “do something.”

He made the decision to go with an advisor in Florida who had been marketing to them all along. I knew the large company and the fees they charged. I also cautioned about the capital gains they would face if they sold investments, as most of their investments they had held a long time.

Months later Elaine emailed me. She thanked me for our work together and explained she never wanted to switch, but her husband was adamant. She wanted me to know they actually had less money and owed taxes for the first time in years because of they had not considered the long-term gains of the investments they were selling. They were only comparing their statements to the previous quarter when they made the switch. They wished she had listened. Time and experience are a valuable teacher.

There is no right thing to do. Why? Because no knows the future. Investing is all about balance. In thinking, in diversification, and in watching the market. Balance your reactions, actions and attitude to the market. The pause button will help you make the best decision for you."

MY COMMENT

IF.......BIG IF....you have properly set up your portfolio for your financial situation, your age, your risk tolerance, and with rational thinking.....you will be fine when this event is over. No one knows when that will be. Perhaps a few months.....who knows. LONG TERM thinking and planing is the key. Unfortunately i have seen more and more people invest in stocks and funds with NO understanding of what LONG TERM means. In my mind long term means at the ABSOLUTE MINIMUM....7 years. Better yet, more like 10-15 years. I have seen a lot of people put money into stocks and funds over the past few years when it is 2 year, or 3 year or 5 year money. THAT is NOT long term money.

 

EASY COME, EASY GO....If I was looking to buy anything, it would NOT be tomorrow. No trader or panicky short term investor is going to want to hold anything over a weekend.

Watching with......BEMUSEMENT.......easy to do as a long term investor that is comfortable with my portfolio risk and financial plan.

ALSO....enjoying watching the MEDIA reaction. Here is one headline as an example:

"Dow falls 1,191 points -- the most in history"

DUH.......the DOW is way higher than ever before in history. The amount of points in a drop is IRRELEVANT. What might count is the ACTUAL percentage drop. The drop today was 4.4%. For example, in the FLASH CRASH of 1987:

"Black Monday is the name commonly attached to the large stock market crash of October 19, 1987.[A] [1] In the United States, the Dow Jones Industrial Average (DJIA) fell exactly 508 points (22.6%).[2] This was the largest one-day percentage drop in history. Significant selling created steep price declines throughout the day, particularly during the last hour and a half of trading. The S&P 500 and Wilshire 5000 indices each declined more than 18 percent, and the S&P 500 futures contract declined 29 percent."

As I type this:

DOW year to date (-9.71%)
SP500 year to date (-7.80%)

So, after all the flailing around today due to.......ONE......a single......reported case of the virus overnight we are at -7.8% on the SP500. NOT a particularly earth shattering drop.

Lets see....at this rate...with the DOW at 25,766, and with an average drop of about 1000 points for a single reported case....we will be at DOW "0" after 26 more cases of the virus are reported in the USA.

On ANOTHER front the CHINESE have completed a MORTALITY study in CHINA. Here is the risk of dying at the moment, by age, in China from the virus:

"Here's the mortality rate for every age bracket, according to the study:

• Children and teens (ages 10 - 19): 0.2%
• 20s: 0.2%
• 30s: 0.2%
• 40s: 0.4%
• 50s: 1.3%
• 60s: 3.6%
• 70s: 8.0%
• 80s and older: 14.8%"

AND......those figures represent the data in a third world country with a third world health system. NO DOUBT the figures will be SIGNIFICANTLY lower in a first world country with world class health care like the USA.

ACTUALLY.....I believe this is a HUGE PLOT by the MILLENNIALS to get rid of the baby boomers and inherit all that money that is held by OLD PEOPLE. SEEMS pretty clear to me when I look at the data above.

 

"I've seen it called "The Boomer Doomer" by some on Reddit"

YES......I knew it.

 

FOR MR DOC......and anyone else.......I tend to post my portfolio model every three or four pages of posts:

I am once again posting my PORTFOLIO MODEL. My initial criteria to start the process to consider a business are.......BIG CAP, AMERICAN, DIVIDEND PAYING, GREAT MANAGEMENT, ICONIC PRODUCT, WORLD WIDE LEADER IN THEIR FIELD, LONG TERM HORIZON, etc, etc, etc.

PORTFOLIO MODEL

"Here is my "PORTFOLIO MODEL" for all accounts managed which is the basis for MUCH of my discussion in this thread. I am re-posting this since I often talk in this thread about my portfolio model. My custom in the past on this sort of thread was to re-post my portfolio model every once in a while since I will tend to talk about it once in a while. I "manage" six portfolios for various family including a trust. ALL are set up in this fashion. If I was starting this portfolio today, lets say with $200,000. I would put half the money into the stock side of the portfolio, with an equal amount going into each stock. The other half of the money would go into the fund side of the portfolio, with an equal amount going into each fund. As is my long time custom, I would than let the portfolio run as it wished with NO re-balancing, in other words, I would let the winners run. Over the LONG TERM of investing in this style (at least in my actual portfolios), the stock side seems to reach and settle in at about 55% of the total portfolio and the fund side at about 45% of the total portfolio over time. That is a GOOD THING since it tells me that my stock picks are generally beating the funds over the longer term. AND....since the funds in the account generally meet or beat the SP500, that is a VERY good thing.

As mentioned in a post in this thread, I include the funds in the portfolio as a counter-balance to my investing BIAS and stock picking BIAS and to add a VALUE style component (Dodge & Cox Stock Fund), a top active management fund that often beats the SP500 (Fidelity Contra Fund) and a SP500 Index Fund to get broad exposure to the best 500 companies in AMERICAN business and economy. The funds also give me broad diversification as a counter-balance to my very concentrated 10 stock portfolio.

STOCKS:

Alphabet Inc
Amazon
Apple
Costco
Home Depot
Honeywell
Johnson & Johnson
Nike
3M
MSFT
PG

MUTUAL FUNDS:

SP500 Index Fund
Fidelity Contra Fund
Dodge & Cox Stock Fund

CAUTION: This is a moderate aggressive to aggressive portfolio on the stock side with the small concentration of stocks and the mix of stocks that I hold and with the concentration of big name tech stocks. Especially for my age group. (70). So for anyone considering this sort of portfolio, be careful and consider your risk tolerance and where you are in your life and financial needs. I am able to do this sort of portfolio since my stock market account is NOT needed for my retirement income AND I have a fairly HIGH RISK TOLERANCE. In addition I am a fully invested, all the time, LONG TERM investor. (LONG TERM meaning many years, 5, 10, 20, years or more)"

MY COMMENT

This portfolio is HIGHLY CONCENTRATED on the big cap side of things. OBVIOUSLY between the funds and my ten stock holdings there is MUCH doubling and tripling up on the stocks. THAT is INTENTIONAL. I strongly subscribe to the view of Buffett and some others that TOO MUCH diversification kills returns. I do NOT believe in the current diversification FAD that most people seem to now follow.......or think they are following. I DO NOT do bonds and think the current level of bonds held by younger investors.....those under age 50.....is extremely foolish.I DO NOT do market timing or Technical Analysis.

SEE post below for the rest of your question about what I would buy....