The Long Term Investor

So glad I am not trying to buy a home right now in our area of 4200 homes. Out of 4200 homes there are.......24.....homes actively for sale. That is insane low inventory......24 out of 4200 homes.

I have been watching home data in our area for many years and this is the lowest inventory I have ever seen.

 

Good job with the earnings Smokie.

 

Sounds about right to me.......as I sit and watch the markets slowly improve today.

How much can you REALLY expect to earn investing?

https://www.riskhedge.com/outplacement/how-much-can-you-really-expect-to-earn-investing/rcm

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

"How much money can you, as an individual investor, really expect to make from investing?

I’m not talking about in a single year… or even five years. I mean over the life of a typical investor—40 years or so.

What’s the best return you can hope for?

Warren Buffett is the greatest long-term investor in history. He’s compounded his money in his holding company, Berkshire Hathaway, at about 20% per year since 1965.

Now, 20% might not sound all that impressive. It looks small compared to the 1,000%+ gains that are achievable in individual investments. Yes, one great stock or crypto pick can multiply your money 10X, 20X, 30X.

But these are one-off gains. They happen once, and that’s it. Hitting a 20X will give you a hit of the feel-good chemical dopamine and something to brag about.

But to really move the needle on your wealth, you must focus on your total portfolio returns. One-off gains, no matter how big, can’t snowball or “compound” into lasting wealth like portfolio returns do.

Don’t get me wrong… it’s okay to speculate. It can be extremely profitable to speculate if you have the proper guidance. But here, I’m talking about achieving sustained success for an entire portfolio.

***Buffett’s 20% over 55 years led to 2,500,000% gains…

No one in history can match that.

Some candidates for the second-greatest investor of all time:

John Templeton made 15% over 38 years.

Seth Klarman’s hedge fund made 15% over about 35 years.

Peter Lynch compounded at 29%—but only for 13 years.

Notice that earning returns of 15% to 20% over long periods is top-of-the-mountain elite? Only a handful have done it. And they are all professional investors—people who dedicated their careers to squeezing out every last 0.1%.

In other words… collecting long-term returns of 15% to 20% isn’t exactly realistic for the average guy.

But here’s some great news: The S&P 500, by itself, has grown roughly 10% per year over the long term.

That’s pretty good! And you can collect it by doing almost nothing. Just put your money in the market and leave it alone.

If you invest $5,000 a year for 40 years and compound your money at 10%, you’ll have $2.4 million to retire on. Forbes says the average American needs $1.7 million to retire.

And the “benchmark” 60/40 portfolio—60% stocks and 40% bonds—isn’t far behind the S&P 500. It has compounded at roughly 9% per year.

***Now here’s the shockingly bad news:

The average investor, according to a comprehensive study done by JPMorgan, makes just 3.6% over the long term.

Disaster, right? You can DO ALMOST NOTHING and earn 10%.

Yet… most investors can’t just do nothing. They get greedy. They get scared. They’re seduced by slick talkers or rotten marketing.

Then they make mistakes.

Remember the scenario above? Now say you invest $5,000 a year for 40 years, but only earn returns of 3.6%. Now you’ve only got $448K when it’s time to retire. Uh oh. Forbes still says you need $1.7 million to retire.

Here’s how all this looks visually.

The green bars are the greatest investors of all time. It’s a worthy goal to earn 15%+ per year like they do, but don’t count on it. The blue bars are returns of simple “do nothing” styles—stocks and 60/40 portfolios. Anyone can easily be in that range by simply buying “the market.”

The red bar is how most people do:



***The first job of any smart investor is to get into the range of the two blue bars above.

That’s your #1 job, above all else. Figure that out first.

Then, and only then, should you think about more advanced things with higher upside, like individual stock picking."

MY COMMENT

Could it be any simpler? No.....this is as simple as it gets. AND.....simply putting money into the SP500 over a lifetime of saving and investing will BEAT the vast majority of investors and traders. All it takes is a simple decision to start and the focus to do it over a lifetime. SO.......JUST DO IT.

 

As a side note to the above......regarding Peter Lynch. Some times you get lucky. Not Lynch.....me.

I was an early investor in Magellan Fund compliments of my mother being in the fund. I rode that fund till Peter Lynch retired. After he left the fund I also left the fund and ended up in Fidelity Contra fund instead.

At that time in my investing life I was already staying fully invested all the time for the long term. It was a nice lesson in the power of seeing a great opportunity and simply.....riding the wave.

 

I like this little article. Risk tolerance is the primary key to being able to invest for the long term and capture all the gains.

How to Determine Your Investment Risk Tolerance
Investment risk tolerance can change according to market conditions and life events.

https://money.usnews.com/investing/...understand-your-true-investing-risk-tolerance

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

"Anyone who's invested in the market for even a short time likely has heard the term "risk tolerance." When applied to a stock-and-bond portfolio, risk tolerance includes factors such as age, time until retirement, income needs and the "sleep at night" factor, which simply refers to an investor's level of anxiety about the market.

How should investors determine their risk tolerance? It can be a tricky question to answer, as a person who is particularly anxious may keep the bulk of his or her assets in cash, which won't generate the return most retirees need. Bonds may feel safer to some, but fixed income also underperforms equity.

Taking too little risk can lead to portfolio underperformance relative to what a retiree needs. Too much risk can lead to sharp downturns at just the wrong time.

Here are some factors to consider when determining your risk tolerance and the mix of investments you want to include in your portfolio:

• What is risk tolerance in investing?
• How risk tolerance affects investing goals.
• When to assess risk tolerance.
• Advisor vs. self-evaluation of risk tolerance.
• Conflicting risk tolerances in couples.

What Is Risk Tolerance in Investing?

Amanda Kaphammer, an independent financial consultant and founder of Sol Spyre in Bend, Oregon, says risk tolerance can be considered a person's willingness, ability and need to take risks.

"Willingness to take risks is a person's attitude about risk; one person may be an adrenaline junkie willing to embrace risk with a devil-may-care attitude; another finds the idea of bungee jumping off a bridge absurd and prefers to keep their feet planted on solid ground," she says.

She adds that ability to take risks accounts for an investor's preparedness to weather the unexpected. For example, does he or she have a sufficient emergency fund and proper insurance coverage?

The need to take risks is tied to the sort of projected return on investment that is required to achieve that person's financial goals.

"What are we aiming for, how much will it cost, and when would we like it to happen, also known as the goal, the funding and the time horizon," Kaphammer says. When those questions can be answered, she adds, an investor or financial advisor can map out a plan to best achieve the necessary return.

How Risk Tolerance Affects Investing Goals

Scott Butler, financial planner at Klauenberg Retirement Solutions in Laurel, Maryland, underscores the need for investors to understand how much it will take to fully fund retirement.

"Each dollar should be linked to a purpose so that it can be invested appropriately accordingly to the time frame," he says. "This usually means that not every dollar should be invested at the same level of risk. Even the most aggressive investors should be conservative with money they need to pay the mortgage next week."

He adds that there's an essential difference between the amount of risk investors need to take to achieve a goal, and how much risk they want to take.

"Being too conservative may be the surest way not to achieve your goals," he cautions. "Conversely, if you can achieve all your goals with a lower rate of return, you need to consider if it is worth taking on additional risk for the chance of a higher return."

When to Assess Risk Tolerance

Investors must also recognize that risk tolerance can change depending on market and economic conditions or circumstances specific to a person's life, among other factors.

Joel Larsen, principal at Navion Financial Advisors in Sacramento, California, says the way to get a true tolerance for risk is to assess it in or shortly after a difficult down market.

"Assessments made when everything is coming up roses will default to be optimistic," he says.

His firm, like many others, uses a risk assessment tool called Riskalyze to quantify risk and establish an investor's expected return.

"Risk tolerance in and of itself does not move even as we age, as it is part of the client's psychological makeup," Larsen says. "What can change is the amount of risk you build into the portfolio at any given point in time, depending on current risks in the markets. We do not set it and forget it."

Risk tolerance must be a moving target, says Scott Sturgeon, founder and senior wealth advisor at Oread Wealth Partners in Leawood, Kansas. "Humans don't live our lives on linear paths or even like the financial projections we show to clients in meetings," he says. "Life is messy, and that's a good thing. People lose their jobs, quit their jobs to start businesses, children are born, parents pass away, people get older, and all kinds of other life events (happen) in between."

He adds that major life events will have an impact on an investor's financial situation and financial goals, as well as attitudes toward risk.

Advisor vs. Self-Evaluation of Risk Tolerance

Investors working with a financial advisor can get help formulating a risk-appropriate plan designed to generate the return they need. But the process can be more difficult for those flying solo.

"Investors without an advisor can approach risk tolerance by evaluating their own financial goals, time horizon and personal risk tolerance," says Michael Ashley Schulman, partner and chief investment officer at Running Point Capital Advisors in El Segundo, California.

He acknowledges, though, that unbiased self-evaluation is difficult.

"I've met many people who consider themselves conservative but are actually aggressive, and vice-versa," Schulman says. "Much depends on their frame of reference."

He notes that people are often aggressive in some aspects of their life and conservative in others.

"We've all seen the person that rushes down the highway like a maniac, but then takes five minutes at the grocery store to select a loaf of bread," he says. "Self-analysis without guidance is challenging; you can consider using online risk tolerance assessments or working with a financial professional on a limited basis."

Schulman says it's important for go-it-alone investors not only to understand the relationship between risk and reward, but also the value of income streams and what they can stomach when portfolio values decline.

Conflicting Risk Tolerances in Couples

It's not uncommon for spouses to have different levels of risk tolerance.

"When two people in a relationship have different risk tolerance levels, it can create tension and disagreements that can be difficult to manage," says Andy Laino, certified financial planner for Prudential Financial in Sarasota, Florida.

"The best way to handle this situation is to first understand and accept each other's risk tolerance levels," he says. "It's important to remember that risk tolerance is a personal preference and that neither person is wrong for having a different opinion."

With these couples, Laino will first do a risk assessment for each individual, then discuss how to implement the appropriate asset allocations.

"Once we have this base level of communication, we can negotiate a level of risk that each party is comfortable with," he says. "Coming to a mutual agreement or compromise on the money is a great learning experience that might be needed for other financial or family issues. Negotiation is key to finding a balance that works for both parties."

MY COMMENT

Very simple stuff.....as usual. BUT....for some people very difficult to achieve an honest recognition of their ability to stand volatility and risk. Much of this is simply your basic personality. It is a BIG red flag if you are constantly being scared out of the markets or jumping in and out of investments....when you think you are a long term investor.

It is amazing how what is very simple can be very difficult for humans

 

SO......when are you leaving Emmett? And....where would you go. Texas? Florida? North or South Carolina? Tennessee?

I should not say this.....I will ruin it....but I think Arkansas is a real sleeper state. Low cost housing, beautiful country of various types, low cost of living, some really cool smaller town and some nice cities.. Although some areas get pretty cold winters.

 

The markets to start the day.

Stock market news today: Stocks fall after strong retail sales data
Here's what's moving markets on Wednesday, February 15, 2023.

https://finance.yahoo.com/news/stock-market-news-today-february-15-2023-130622082.html

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

"U.S. stocks descended at Wednesday's open as investors pondered the outlook for interest rates after economic data showed strong consumer spending and an uptick in inflation across January.

The S&P 500 (^GSPC) sank 0.5%, while the Dow Jones Industrial Average (^DJI) erased 180 points, or about the same percentage. The technology-heavy Nasdaq Composite (^IXIC) was off by 0.3%.

Retail sales smashed estimates last month, data from the Commerce Department showed, stoking worries that robust consumption combined with a higher-than-expected reading on consumer prices Tuesday may keep the Federal Reserve on a hawkish track.

The government said retail sales rose 3%, the largest one-month jump since March 2021 and well above Bloomberg estimates of 1.9%.

"After a disappointing December, a jump in retail sales indicate that the lasting inflation we have experienced isn’t holding back the consumer," Mike Loewengart, head of model portfolio construction at Morgan Stanley's Global Investment Office, said in a note. "Expect some volatility in the near-term as investors mull over the Fed’s next steps and what, if anything, could lead it to cut rates in the calendar year."

On the corporate side, investors were parsing through more earnings reports this week. Airbnb (ABNB) was in the spotlight after the lodging company reported record sales in the fourth quarter, notching its first profitable year in 2022. Executives also unveiled a better-than-expected forecast for the current quarter, citing strong post-pandemic travel demand. Shares soared nearly 11%.

Tesla's (TSLA) stock advanced after chief executive Elon Musk said he plans to appoint a new CEO to Twitter, the social media platform he acquired last year, by the end of the year.

Separately, Bloomberg News reported Wednesday that the electric vehicle maker is expected to partially pause production at its China factory for upgrades to the facility to make a refreshed version of its Model 3 car.

Devon Energy Corporation (DVN) shares fell 9% after the company said fourth-quarter profit was dented by the impact of Winter Storm Elliot on its oil and gas wells.

In other areas of the market, bond yields moved higher Wednesday, with the rate-sensitive two-year Treasury yield approaching the highest level since November, according to Bloomberg data. The U.S. dollar index also climbed against other currencies.

Meanwhile, in commodities markets, oil continued to barrel lower as the dollar rose and U.S. stockpiles were estimated to have grown. West Texas Intermediate (WTI) crude futures, the U.S. benchmark, fell 1% Wednesday morning to trade around $78.

The moves on Wednesday come after a volatile previous session that saw all three major averages end the day around flat after January's Consumer Price Index (CPI) came in both hot and cold.

Following the release, several Fed officials indicated interest rates would need to go higher. On Tuesday, Dallas Fed President Lorie Logan said in remarks at Prairie View A&M University in Texas that the U.S. central bank "must remain prepared to continue rate increases for a longer period than previously anticipated."

CPI rose 0.5% in the first month of the year, an acceleration from the prior month, and 6.4% on an annual basis, a small move lower from the previous year-over-year print. Core CPI, which strips out the volatile food and energy components of the report, climbed 0.4% over the prior month and 5.6% year-over-year, also higher than forecast.

"There are more and more signs of the market pricing the no landing scenario where the economy remains strong, and inflation remains sticky and persistent," Apollo Global Management chief economist Torsten Slok said in a Wednesday note, adding that one-year breakeven inflation expectations are approaching 3%, spurred higher by strong January employment data and Tuesday's CPI report.

"In response to this, the Fed will have to be more hawkish to ensure that inflation expectations do not drift too far away from the FOMC’s 2% inflation target," Slok added."

MY COMMENT

The...."no new news"....market continues in spite of those that want to create drama for gain.....the financial media. No....nothing has changed with the FED....still.....2-3 more rate increases and in my view ZERO chance to lower rates till well into 2024. EVERYONE know this even if they are saying something different.

My view on the 2023 recession remains the same....it is NOT going to happen. Unless they change the definition of what is a recession. I would not put it past them.

 

AAPL stock is UP today.....I assume because Warren Buffet just added a......"ton" (investing term of art) of shares to his Berkshire portfolio.

Buffett's firm buys Apple, slashes chipmaker and bank stakes

https://news.yahoo.com/buffetts-firm-buys-apple-slashes-235505407.html

 

I have a relative that just moved from Marin County area to South Carolina. They had a regular house which they sold and used the money to buy a 6000 sq foot mansion with 6 acres on the river in South Carolina.

 

Although I forgot about your film work Emmett. That is a big reason to stay in California.

 

The financial media freakout story of the day. As usual not relevant to long term investing.

Retail sales jump as Americans defy inflation and rate hikes

https://finance.yahoo.com/news/retail-sales-jump-americans-defy-133642448.html

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

"WASHINGTON (AP) — America's consumers rebounded last month from a weak holiday shopping season by boosting their spending at stores and restaurants at the fastest pace in nearly two years, underscoring the economy's resilience in the face of higher prices and multiple interest rate hikes by the Federal Reserve.

The government said Wednesday that retail sales jumped 3% in January, after having sunk the previous two months. It was the largest one-month increase since March 2021, when a round of stimulus checks gave a big boost to spending. Excluding the pandemic era, January's rise was the largest in more than two decades.

Driving the gain was a jump in auto sales, along with healthy spending at restaurants, electronics stores and furniture outlets. Some of the supply shortages that had slowed auto production have eased, and more cars are gradually moving onto dealer lots. The enlarged inventories have enabled dealers to meet more of the nation's pent-up demand for vehicles.

Wednesday's robust retail sales figures, along with a strong January job report, suggest that the economy remains durable, perhaps even strengthening, and at little risk of succumbing to a recession anytime soon. Earlier this week, economists at Goldman Sachs reduced the likelihood of a recession this year from 35% to just 25%.

Brisk consumer spending, though, can also intensify upward pressure on inflation. The latest measure of consumer inflation showed that it slowed slightly on a year-over-year basis in January but rose sharply from December to January.

The combination of solid spending and hiring will also likely raise pressure on the Federal Reserve to raise its benchmark interest rate even further. The Fed has already signaled that it expects to carry out two more quarter-point hikes, to a range of 5% to 5.25%, which would be the highest level in 15 years. On Tuesday, Deutsche Bank said it expected the Fed to add two additional hikes on top of that this year, to a range of 5.5% to 5.75%.

Some of last month's retail sales gain probably reflected unusually warm weather, which might have encouraged more people to buy cars, go shopping and eat out. The government’s seasonal adjustment process also likely helped boost January’s figure. Its seasonal adjustments aim to modify sales data for typical calendar patterns. An example is a spike in spending during the holiday shopping season and then a drop in January.

“While the report suggests consumers got their mojo back, seasonal adjustment noise and the milder winter weather in January explain part of the strength,” said Gregory Daco, chief economist at EY Parthenon. “The stronger-than-expected report puts consumption on a better footing at the start of 2023 and points to positive though sluggish consumer spending growth” in the current January-March quarter.

The retail sales figures showed that spending at restaurants soared 7.2% in January and more than 25% compared with a year earlier. The retail sales report isn't adjusted for inflation, so some of that increase reflects higher prices. According to the government's inflation report, restaurant prices have increased 8% in the past year.

Whether America’s shoppers can continue to spend briskly will help determine how the economy fares. The eight interest rate hikes the Fed has carried out in the past year have raised the costs of mortgages and auto loans as well as credit card interest rates. Inflation has also eroded workers' paychecks, thereby limiting their ability to spend freely.

Some signs indicate that businesses are expecting a more cautious consumer. Coca-Cola, for example, said Tuesday that its price hikes last year didn't reduce demand for its beverages during the October-December quarter. But the company added that it anticipates slower sales growth this year and expects to raise prices at a much slower rate.

And PepsiCo said it wasn't planning further price hikes, according to a Reuters report, because it isn't sure consumers will be able to afford them this year.

For all the challenges facing consumers, they continue to show resilience. Several factors likely helped propel last month's spending. About 70 million recipients of Social Security and other government pension programs last month received an 8.7% boost in their benefit checks, an annual cost-of-living adjustment to offset inflation. It was the largest such increase in 40 years.

The job market also surged in January, with nearly a half-million new jobs added. The unemployment rate reached 3.4%, its lowest level since 1969. With many businesses still eager to hire and keep workers, average wages and salaries have risen about 5% from a year ago — among the fastest such rates of increase in decades.

Those raises have generally been eaten up by inflation. Still, consumer price increases have been slowing. And for many households, a sharp drop in gas prices since summer has freed up more money to spend.

On Tuesday, the government reported that inflation eased again in January compared with a year earlier, the seventh straight such decline, to 6.4% from 6.5% in December. But on a month-to-month basis, price increases accelerated in January compared with November and December, evidence that high inflation won’t be defeated quickly or smoothly.

Lorie Logan, president of the Federal Reserve Bank of Dallas and a member of the 19-person Fed committee that sets interest rates, warned Tuesday that the central bank might have to carry out more rate hikes than it has so far signaled.

“We must remain prepared to continue rate increases for a longer period than previously anticipated, if such a path is necessary to respond to changes in the economic outlook,” she said in prepared remarks."

MY COMMENT

The last thing I would use any of this economic data for is investing decisions. I dont trust this data in the slightest. I believe it is totally distorted and far from accurate.

I DO totally agree that the FED is going to do 2 and probably 3 more rate increases and in the end we will see rates at 5.5% to 5.75%. That has been my expectation since last June.

 

Looking at all the accounts I manage......I am dead flat today. Some have a microscopic gain and some have a microscopic loss. Just DEAD FLAT at the moment. In my primary account.....same thing.....dead flat. Five stocks UP and five stocks DOWN.

My gaining stocks are.....AAPL. COST, HD, GOOGL, and TSLA. My losing stocks are....AMZN, NKE, MSFT, NVDA, and HON.

On a day when "most" of the general averages are all down I consider my result at the moment as......"pretty good".

BUt....hang onto your hats.....GASP.....the NASDAQ has now turned positive for the day.....+0.07%.

 

Is that D. W. Griffith...being quoted above. Oh right he is dead.....the quote is "Griffin.

I still have a lot of good knowledge from my college class....."Masters Of The Cinema". I figured what better class....you get to watch movies. I did like it and it was interesting....but....a fair amount of work with lots to learn like any history class.