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[quote=scaredyclassic]in spite of the fact that every prospectus warns you that past performance does not predict future results, we all kinda believe that past performance predicts future results and the prospectus is just saying that cause the dumb old stodgy SEC makes them.[/quote]

You sort of have to go by past performance. It might not match but that is the best guess. If not, my planning on getting 9 percent returns and being able to retire early is a bad decision.

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I suppose that is a good argument to have bonds in your portfolio. I just looked at the four bonds I can choose from in my 401k and the yields are really bad, 1.61%, 0.3, 0.38 and -.73 for the last year. Hopefully closer to retirement the yields will be better but they seem to be uninvestable for now.

I did do some work anaylyzing the last numbers from the 2007 to 2013 US crash to figure out if it made sense to time the market and the change in performance by timing and missing by x years and for long term holders, it didn’t make sense. Better to ride out the crash in most cases. I suppose in a 401k or IRA where you can go in and out without penalty it might make more sense to switch between stocks and bonds.

I should really not be lazy and quote the text, this was in response to the Japan market perfromance one entry above

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I spent alot of time calculating retirement numbers this year in preparation of retiring in case the company forces people into the office (I’m way too safe about Covid)

Initially I had 10 percent in my spreadsheet for 401k performance, but changed to 9 percent recently. But this is for a very risky 401k, everything in equities, mostly sp500 index. And for that performance has been significantly better than 9 percent so I think that is a good number to use. I’ve been max out saver into 401K so the amount of money I have in there is probably too much so I can afford more risk. The RMD at age 72 is too high, thinking about t72 get money out faster later.

Until retirement age, plan is to start cashing out my brokerage accounts. Long time holder so percentage of gains that are long term are now 96 percent so its almost all tax free. So can start cashing out up to 80K at 3 percent CA tax and 0 percent fed. So the insanely low tax base will mitigate the significant reduction in income.

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At 10 percent gains, I calculate it to be more like 200K at age 30. You should have started your kids working at 6 or so for 500K

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Putting in 6K starting at such a young age is going to be huge later in life, all tax free.

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I wasn’t very serious about this. Problem is you can’t contribute more than you earned.

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What a coincidence, I just realized this morning that when I quit my job (because they force you into the office and I don’t think it is safe because of Covid) then I will not be able to do the Roth IRA because you need earned income for that, not investment income. But if I create a company for my rental as you suggest, then it can pay me each year for taking care of the rental so I can continue contributing to a Roth IRA!

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I just don’t see how this year can be as good as last year. Never had a year so good as last year in my trading account. Problem for me is my trading account is taxable. So even though market is going down, I can’t sell without huge tax hits.

401k is in sp500 index, I don’t want to screw up my retirement and there is enough in there already that I don’t need to find outsized gains. Just going to let that sit.

Roth IRA allows me to trade tax free but there just isn’t much money in there compared to my other accounts.

Company RSU/ESPP held for so long that gains are so big now, I don’t think I can sell, just take in the dividends.

So not much I can do except for small trades and hold on and pray there isn’t a crash coming soon.

We can’t possibly get another year like last year, right?

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Better not to have an impound account. Then you can control your income better. For example, I’ll probably make less money next year so I will pay both installments this year for my rental to reduce my rental income this year and have more rental income next year.

But wow for the stock market. Thought being a long term holder could be a mistake when the tech stocks took a dive last couple of months but to come back in just 2 days. Wow! Glad I’m a long term holder, taxes will be crazy high otherwise.

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[quote=Coronita]I moved my trading account back to more of a cash holding again by selling half of everything.

I guess I’m just thinking with all the social media i-gen stars now talking about the stock market and how easy it is to make money, and anyone can do it… Reminds me of old times when a financially illiterate receptionist could be heard talking about how easy it is to make money in the stock market during coffee breaks back in 2000.

If we see a correction, maybe I’ll slowly move things back in. Otherwise, I’m contend with things this year.

Less greedy, more caution.[/quote]

I suppose the question really is given the strong demand for stocks (there really isn’t anything else to invest in), how high does it go before it breaks down. I think it can go up alot more before it crashes. And if it does crash earlier, I’ll just ride it out. I don’t think my main holdings like Apple, Amazon, Nvidia, Microsoft and AMD are going to go bankrupt. Well maybe AMD could go down alot if Intel performs better. But at that point I’ll be playing with house money.

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I think there may be a correction too but high tech growth should be hurt less since they work in the stay at home economy. It’s the retail/travel that’s recovered somewhat that will probably head down.

Just don’t see a vaccine taking effect yet and you got schools opening. Incumbents no longer boosting the economy to get re-elected.

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[quote=Coronita][quote=plm][quote=Reality][quote=plm]
Actually I think that selling and buying back later at a lower prices is a way to have even better returns but much riskier since you have to time the market properly. Isn’t it safest to buy and hold and just don’t sell when they market crashes?[/quote]

What if when you need retirement income coincides with the crash?[/quote]

Well this last crash only lasted for a few months… But seriously, I have enough cash for a couple years worth of expenses and I have rental and significant dividend income as well so its unlikely I will have to sell at the bottom.[/quote]

I think Reality was referring to not just the brief crash that happened due to covid.

I think Reality was referring to a real crash like the one in 2001 which lasted for several years and which a lot of overspeculated or just nonsense high flyer companies ended up crashing to oblivion and never recovered. Many of us remember.

Index fund investments survived and recovered..Many individual stocks didn’t and many people who thought they could outsmart the indexes only thought so because they never really experienced a real life crash.

If you look at how the indexes are performing right now, it’s sort of misleading. It’s not that most of the companies that make up those indexes are all doing well this year Most of them are still negative. It’s just a few select companies in those indexes have went beserk and those few companies are making the entire index look good. Companies like AMD which is trading around $86/share even though it absolutely makes no sense.

Regarding protection. I can only speak of a large company issued stock options grant. Back then, one thing we did do to protect from a big crash was to buy out of money out options regularly. I worked for a company that priced there IPO at $30/share and opened at $217, and within that first 6 months went as high as $415/share even though we were still unprofitable. Our valuation was a $6 billion software company even though are revenue was around $50million. Made no sense whatsoever. I remember the moment put options were available, many of us were buying them when the stock price was still above $300/share just so it could protect all the unvested employee stock options that had a $30 strike price that we needed to wait 4 years to fully vest

It wasn’t long after the company stock fell to $7/share.

Retail speculators lost their shirts.

Employees got laid off.

Some employees that got laid off had a big grin on their face because suddenly their out of money put options that was insurance for their unvested company issued stock options was worth a lot of money, and they didn’t need to wait for 4 years of vesting to get that money which was almost the same as how much their company issued options would have been…

Since then, companies have gotten a lot smarter. Many have a company policy against you or a family member owning derivatives of the company stock….

Whenever things really get frothy, individual stock ownership gets a lot more risky. I think for some of these speculation, there has to be an exit strategy because it is almost impossible to be consistently have the winning hand all the time. Once you’ve reached a point of a lucky windfall that matters, it’s imho an equal amount of effort to try to preserve and prevent losing most of it, and that means finding a way to shift that money somewhere else that is less likely to lose as much as fast as you can in individual stocks.

At least that’s how I was able to afford to buy a primary SFH down here when I moved back in 2004, when housing was already pretty expensive and also getting frothy.[/quote]

Well your example implies a price/sales of 120. My highest two are Fastly and Okta which are high in the 30s and 40s. Okta just popped another 7 percent today probably because Salesforce popped 25 percent after great earnings yesterday. When these momentum stocks I own keep going up, blind greed takes over and I can’t sell. I’m even selling the few loser dividend stocks I own like CVS and buying growth tech instead, screw diversification.

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[quote=Reality][quote=plm]
Actually I think that selling and buying back later at a lower prices is a way to have even better returns but much riskier since you have to time the market properly. Isn’t it safest to buy and hold and just don’t sell when they market crashes?[/quote]

What if when you need retirement income coincides with the crash?[/quote]

Well this last crash only lasted for a few months… But seriously, I have enough cash for a couple years worth of expenses and I have rental and significant dividend income as well so its unlikely I will have to sell at the bottom.

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It’s actually helpful people are sharing their returns. I was thinking my returns are too absurd and should start selling but now I’m going to stick to my plan, buy and hold until I retire.

Actually I think that selling and buying back later at a lower prices is a way to have even better returns but much riskier since you have to time the market properly. Isn’t it safest to buy and hold and just don’t sell when they market crashes?

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I think I understand now. It is possible to do the backdoor Roth IRA but its most likely a bad idea because you have to pay taxes on a portion of any pretax IRA so it is no longer free of taxes doing the backdoor roth.

This is what I found from https://www.kitces.com/blog/how-to-do-a-backdoor-roth-ira-contribution-while-avoiding-the-ira-aggregation-rule-and-the-step-transaction-doctrine/

The IRA Aggregation Rule Under IRC Section 408(d)(2)
The first caveat to the backdoor Roth contribution strategy is what’s called the “IRA aggregation rule” under IRC Section 408(d)(2).

The IRA aggregate rule stipulates that when an individual has multiple IRAs, they will all be treated as one account when determining the tax consequences of any distributions (including a distribution out of the account for a Roth conversion).

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