# Moral Hazards



## PuckiTwo (Oct 26, 2011)

A number of CMFers have, almost flippantly applauded “the great opportunity we have all waited for to deploy the cash (or sometimes the _borrowed money_) into new equities”. If you feel like that - good for you. It is your right and privilege.

However, there are other investors, who do not speak up, that do not have 20/30/40 years of accumulation phase before them so that they can live happily ever after when they turn 45/50/55. Not everybody has a secured government pension or has inherited or knows how to hedge.
Canada is a country with an aging population, people who rely on their savings/earnings of past years. Downturns like these can destroy their livelihood. 

Me personally, I do not find the drop in markets funny at all and I am absolutely frightened by this financial situation. You can’t control it, you don’t know where it stops and if it stops. Do you sell where you still have profits, do you hold? Do you wait until all your hard earned money is
depleted? If it is eaten up by the market - there will be no more.

It quite annoys me to read “that stock xxx is becoming a good buy” and “this is a good entry point”, “...would like to take a position”. It confuses me. How does one know “that this is ‘THE good entry point”? Days after these posts were written the market is still crashing down. 

Maybe people who write this could be a little bit more cautious - other readers may take you “for gospel”. 

Readers who seriously want to learn and get information that helps them to make a decision will get very good reading material on this forum: 

There are very valuable viewpoints discussed and described by HaroldCrump, AltaRed, humble_pie, T.Gal, Pluto, etfstrader, lonewolf, leeder, on urgent geopolitical/economical/industry sectorial backgrounds, investing strategies, options, etc. Not always easy to
read and understand but very educational nonetheless. And as I understand it....... all of them preach patience.


----------



## none (Jan 15, 2013)

Meh, I think people have to value the advice they get her with how much they paid for it.

If you have learned anything you should have your positions set up in such a way that these drops have a minimal impact on your portfolio. Hopefully you didn't invest all oil. that would have been silly and I know of no one that would advocate such an investing approach.

To answer your question - you rebalance. That's all you can do.


----------



## Plugging Along (Jan 3, 2011)

This may sound harsh, but I truly believe that if one is frightened about the situation, then that says a lot about their risk tolerance, This is not meant to be a criticism, it should be an opportunity for one to reflect on what they are confortable with. One should not be in equities if they are that close to retirement. 



I am very heavily invested in oil, my WHOLE TFSA is in oil. It is at a 40% drop since I last checked. I actually stopped checking. I bought in for long term, and I am sticking to it. 

This forum is to learn, but the people who use this forum should do their own research, they aren't paying a thing. If not, then they could hire an advisor. That is exactly what I did when I started. I was reckless and knew I needed an advisor to help me keep patience and a levelled head. Knowing one self is something one will not get off a forum.


----------



## indexxx (Oct 31, 2011)

Well, I do feel your fear on some levels when things start plummeting. But this is an open forum, people give each other advice or input or thoughts, and the bottom line is that each person needs to do their own due diligence as to when and what to buy or sell. Nobody can KNOW for certain that 'this is THE good entry point', or exit point. Those without the stomach for equities and volatility would probably be much more comfortable (and get better average returns over time) to simply use a couch-potato strategy; set it and forget it with index funds.

As for those nearing retirement etc, we are not responsible for their financial decisions in their lives, and simply saying that such and such a stock is a screaming buy because it has dropped does not imply that anyone is happy about someone else losing their shirt. It's kind of like investing in 'sin' stocks like tobacco, alcohol, etc. Does anybody who invests in those companies want people to get diseases associated with those products? Of course not. But this is the reality of a capitalist society- some profit when others lose. Should I not go to see my favorite band and send the $30 to Save The Children instead? Some would say yes, I say that nobody can carry the weight of the world on their shoulders.


----------



## Just a Guy (Mar 27, 2012)

No one can ever predict the bottom...everyone is free to have an opinion. What you learn, if you read the site carefully (and aren't just here to make a quick buck) is who's opinion is worth listening to and which are just noise.

I suppose it's also part of the learning experience.

The best advice I ever heard about investing is to consider every dollar you invest to be spent money, like a cup of coffee money. If you really need it, you shouldn't be investing it.

If your investments do well, you get a bonus, if they tank, it was spent money you paid for an education as I'm sure you learned something (even if it's that you're not a very good investor). 

Of course, I also believe you have to get into the market (whichever market) at some point to benefit from it. If you're sitting on the sidelines you won't lose, but you also have no chance of winning.

I, personally try to buy stocks during a crisis, so the prices are falling a lot...I've never hit the real bottom, but you pick a point at which you feel comfortable with. That point is different for different people. If you guess right, you may lose money short term, but in the long run it'll go higher.

Short term investing is more like gambling than investing...there are, of course, professional gamblers who can make a living at it, but it's not for everyone.

You have to know yourself and your style.


----------



## My Own Advisor (Sep 24, 2012)

Agreed with other comments.

@PuckiTwo, I appreciate your courage to comment first of all. Secondly, you are right, there are investors in here who do not have 20/30/40 years of accumulation years before them. That said, I think what makes this forum (and forums in general great) is that people can learn from others but mostly importantly about themselves.

I will explain...just my take of course:

No doubt downturns like these can destroy folks retirement savings. On the flipside, downturns bring huge opportunities. 
Does anyone in here have a crystal ball? I highly doubt it so please take the “that stock xxx is becoming a good buy” and “this is a good entry point” and the “...would like to take a position" in with a massive dose of salt.

Take this forum for what it is, a place to read, learn and in some cases just be entertained.

For those that are seriously worried about these markets, my perspective is, you likely have the wrong financial plan in place. This isn't a knock, it simply means everyone's tolerance and risk and comfort-level with investing is different. Some market downturns scare the hell outta people. This is fine. It just means they likely shouldn't be invested in the market or if they are, they best have a sound financial expert to lean on at times like these. It doesn't make those people inferior to the investor who wants the market to crash. It just makes them different. Watching the market go down is not for everyone and it never will be. 

Only you know where your comfort level is and hopefully this forum can help you determine that.

In closing, there are only a few things you can control when it comes to investing. Taxes, money management fees and your behaviour. What the markets do, what the interest rates will be, what inflation will be - is totally out of your control.
Your behaviour as a saver and an investor is ultimately your most powerful investing trait but it can also be your biggest liability. 

The investing rewards come, I think, when you finally figure out who you are and what investor you want to be.


----------



## Fraser19 (Aug 23, 2013)

I do not find it funny at all, I don't think anyone does. However some of us are happy that this drop has come. For me this is an opportunity that has a lot of upside for me. It does not come around very often.
Really if someone is being deeply effected by this they are in the wrong investments.
My TFSA is -35% I am 100% equity and about 90% of that is oil.
My RRSP is still +4% for the year it is a very well diversify combination of Canadian, US and international equity with some bonds, probably 15% oil. While my gains from this year have been largely wiped out I have not lost anything and I have taken great care for it to be that way. 

Right now we have a massive oversupply of oil. The banks, telcos and utility have not really been that effected. Most of them are still in the green for YTD return. I would have a hard time feeling empathetic for an informed investor who is close to retirement, in mostly equity and poorly diversified.

It just comes down to what is the time horizon on hand and what level of security is needed. Then construct a portfolio that will fit within those guidelines. I know I will have enough bonds / GIC's to cover myself for a few years in retirement if the market sinks when I am getting closer to that age.


----------



## PuckiTwo (Oct 26, 2011)

I believe my post has been misunderstood a little bit.

None: I didn’t ask a question, at least not a personal one. The questions I asked were of pure rhetoric nature.

Plugging Along/Indexx/Fraser19: What I wanted was to encourage others who are not so fortunate as some on this forum AND who do not know how to deal with this challenging situation to speak up and learn from here. There must be lots of people/investors who do not handle the situation as well as you obviously do. To those people you should say: be cautious.

It helps lesser sophisticated investors much more when they read a statement like MOA made in another thread:


> ...... I hope I can just save enough in the coming weeks and months to buy more. I don't have lots of money to throw at the market and I will not get into leveraged investing when I still have a fat mortgage


.

To me that’s an honest statement which brings value to the reader, and that’s very different from “wow, hoorah, the market is going down”. And it also doesn’t help if you say “if you are old you shouldn’t be in equities” or some such foolishness. Because why this person is in the market or not depends on its circumstances.

One last this time _personal_ remark: this market downturn does frighten me - and that is my privilege. But that doesn’t mean that I hide like Belguy under the bed.


----------



## indexxx (Oct 31, 2011)

The other thing I forgot to add was that those nearing retirement would usually be out of the higher risk instruments like equities and into GICs or other more generally stable items. Also, the fear that has been mentioned is, in my case, mostly mitigated by the use of stop-losses. So as a given stock rises, I raise my stop-loss accordingly; so for instance I bought FTS in the spring at around $30-32 a share, and I'm up roughly 23% as of today. Normally I would sell at 12-15% and lock in the gain, but as I bought enough to drip, this is a keeper. However, I also don't want to lose those potential capital gains so I have moved my stop-loss up as the stock went up, always keeping it at a place where if something dire happened and it crashed, I would lock in the vast majority of my gains. (Knowing that I can always re-buy it if I want). 

If (or when...) another 2008 happens, I'd rather trigger my stop losses and be sitting on a pile of cash made riding the bull (and tuck it into a short-term HISA or something) than watch my portfolio value evaporate.

You have a right to be fearful- nobody wants to lose their intended retirement finds and there is nothing remotely funny about it to anyone here I'm sure. But using that fear to find ways to minimize your exposure to potential risk and loss is the key IMHO.


----------



## tygrus (Mar 13, 2012)

The people who are eying an entry point into this market don't under stand whats really happening. The TSX and some stock are not just down because of some off days in the market. They are down because oil has entered a new structural change and the TSX is along for the ride.

The folks in Alberta have know about the surging shale out of the US for more than 8 years. So they made big bets to try and stop it from getting a foothold. They ramped up development budgets trying to get as much as they could on stream then get it into a world price hub so they could pay down some debt and then hopefully find an operating margin that lets them continue forever while all that shale stays in the ground.

Well the US won this bet by delaying the pipelines. So the new crude didn't get into the trading hub like it was suppose to a few years ago because Keystone was stalled and our efforts to get it off shore are dead too. Gateway and Energy East are just wet dreams now. Never going to happen. So now the US is self sufficient and we have no of shore export hub. Mean while china now buys oil from Russia and Iran. 

Now tell me this is a bargain scenario to buy in to?


----------



## Eclectic12 (Oct 20, 2010)

PuckiTwo said:


> ﻿I believe my post has been misunderstood a little bit ...
> What I wanted was to encourage others who are not so fortunate as some on this forum AND who do not know how to deal with this challenging situation to speak up and learn from here ...


It does cover a lot of ground with a lot of viewpoints, commentary and advice. 

Without more direct questions which are not rhetorical in nature - it would not surprise me if those you are trying to encourage either are still processing what was said or did not see the invitation to comment.


Cheers


----------



## Just a Guy (Mar 27, 2012)

One of the ways not to panic is to be diversified. Not diversified like an analyst would say "buy a well balanced portfolio of stocks bonds and mutual funds" because to me, these are all the same products and tend to go up/down together. 

A truly diversified person buys (or invests in) stocks/bonds, real estate and businesses. True, in a perfect storm, all can go down together, but I've rarely found that all three do...especially if your business sells products or services that people need in a bad economy and you don't rent/flip high end housing.

Fear of a downturn is always in the back of my mind when I invest in anything. I always ask what will happen to this if the economy turns south before I buy anything. I usually only pick up stocks when they are already falling for just that reason.

In real estate, I don't buy places that are too expensive that they can't cash flow in a bad economy, that's why I have limits on what I even look at.

Too many people look at the market when it's good and try to get in...that's why people fear downturns.

The old rule buy low, sell high sounds easy, but it goes against risk tolerance for most people. They want to buy winners...but by then the winning has been done. 

No one wanted to buy the stocks or real estate when I get in, that's why it's cheap, but if they did, they wouldn't fear it going down as much after the run up.

You have to keep emotions out of the equation and look at the numbers. In a panic sell off the good goes with the bad, know the good and pick it up. The cream always rises to the top, even after being stirred.


----------



## dime (Jun 20, 2013)

PuckiTwo said:


> Me personally, I do not find the drop in markets funny at all and I am absolutely frightened by this financial situation. You can’t control it, you don’t know where it stops and if it stops. Do you sell where you still have profits, do you hold? Do you wait until all your hard earned money is depleted? If it is eaten up by the market - there will be no more.



How long? Well it took 5 years to break if you invested at the 2009 peak and held. It might also take some of us another 5 years to break even from what we invested during August this year. 


No it's not funny at all. Many of us got little sleep during 2008 crash ... it was a living nightmare. Much like how many people are feeling right now. 

People deal with the stress differently. Some go quiet and hide... others joke around and get obnoxious. Don't take it personally. 


You have to be extremely patient and don't invest anything you can't afford to lose. 


If you do invest more at some point, learn the time tested strategies for reducing the risk of your portfolio. 


You're among many friends here. We feel your pain.


----------



## Canuck (Mar 13, 2012)

I wish there was a "like" or "thumbs-up" option on this forum. Some great posts on this thread.


----------



## GoldStone (Mar 6, 2011)

XIU is up 4% year to date. Add 2.5% in dividends, you get 6.5% total return. Not great, but not terrible either.

SPY is up 12% YTD including the dividends. A great year for US stocks.

VAB (Canadian Aggregate Bond ETF) is up 8% YTD. A terrific year for bonds.

I kind of fail to see what all the drama is about.

Perhaps the lesson here is: retired folks of limited means must not invest in the volatile sectors such as energy. No matter how tempting the yields look.


----------



## My Own Advisor (Sep 24, 2012)

@PuckiTwo, it IS an honest statement, I can assure you


----------



## humble_pie (Jun 7, 2009)

every bear market any of us ever seen crashes much faster than the long, slow bull climb up what's often called the "wall of worry" that preceded it. A bear market, even a mini-bear like the present one, will typically undo in a few short weeks all of the gain that had taken the previous 18-24 months to accomplish.

it always seems to me that it's the speed of a crash, not the magnitude of a crash, that alarms people.

the present energy crash does not appear, to me, to have wreaked its worst yet. Those capex reductions being announced will surely mean layoffs. On a scale that is likely to migrate to other sectors of the economy & other areas of the country.


----------



## My Own Advisor (Sep 24, 2012)

I think you're right Humble.

Most of the economy has been riding on the coattails of our oil industry. Once some of the big paying jobs go in Alberta, there are fewer people to by the inflated houses and less folks paying big taxes.


----------



## HaroldCrump (Jun 10, 2009)

Every large & sudden market correction like this contains the seeds of contagion.
All sectors, all economies, all markets are now inter-linked.
Any major correction can easily spiral into massive contagion.

The question is - how quickly can it be prevented, either by fundamental market actions, or govt. intervention, or geo-political solutions.
We know about the cases where problems in one sector causes widespread contagion - such as the Asian currency crisis of 1997, the tech crash of 2000, and the housing crash of 2007/8.

However, what we do not see/know about are all the other dozens of cases where problems in one sector did not cause widespread contagion, and self-corrected.

The question is - which one is this? :biggrin:


----------



## humble_pie (Jun 7, 2009)

HaroldCrump said:


> ... The question is - which one is this? :biggrin:



none of us alive ever lived through the great depression, nor did any of us live in japan from 1990-2012. Ergo, not one of us has ever lived through a prolonged economic wasteland.

for us, the bear market experiences have all been shorter & happier. Markets have recovered. Sure, the sharp, jolting, fast-collapsing bears are alarming. Sure, they dislocate or even devastate many local economies & sectors.

but what we have always seen is that the market ship of state does right itself & it does sail forward once again.

on a local basis, i'm concerned about the hedged energy contracts, i'm concerned that some counterparties will fail & any such failures could destroy the very oilco they are supposed to be protecting. Insurance from this outcome would arise in cases where an oilco had diversified its futures contracts among a wide variety of counterparties, preferably in several different countries.


----------



## Guban (Jul 5, 2011)

humble_pie said:


> the present energy crash does not appear, to me, to have wreaked its worst yet.


This is the problem with actively investing. It seems the NOBODY can consistently pick the worst (or best) time. It seems that the information suddenly comes in, and then everybody agrees that yesterday/last week was the worst.

If you do see that the worst is nearing or just past, please let us know humble, and then we can rush in to buy!


----------



## Toronto.gal (Jan 8, 2010)

*Pucki2:* You're absolutely correct, time is not on everyone's side, but I do find 'some' of the annoying comments here not much different from what the daily headlines offer us, so sometimes we just need to laugh at both and not pay much attention, except to our portfolios, and by that, I don't mean to panic, but at how we can take advantage of the volatility.

Market crashes scare *everyone*, even GEN X/Y/Z [no matter what they say], and reason why so many portfolios crash at times like this. I personally focus on my ACBs & mistakes at opportunistic times like this, and keep the balancing aspect in mind, ie, it's not just about buying when prices are low, but booking some profits when prices are high, especially with volatile type investments like commodities. For those that absolutely must sell, even at a loss, it does not need to be the entire position, unless there is good reason to do so. 

Having read your posts, you sound pretty disciplined/knowledgeable, so I'm sure you have a diversified portfolio.


----------



## Eclectic12 (Oct 20, 2010)

Just a Guy said:


> One of the ways not to panic is to be diversified. Not diversified like an analyst would say "buy a well balanced portfolio of stocks bonds and mutual funds" because to me, these are all the same products and tend to go up/down together.
> 
> A truly diversified person buys (or invests in) stocks/bonds, real estate and businesses.
> True, in a perfect storm, all can go down together, but I've rarely found that all three do...


Where one has the ability, knowledge etc - that's great ... at the same time, having co-workers complain about their focused portfolio being down 40% while my diversified portfolio is up 12%, this level of diversification is good too.




Just a Guy said:


> ... No one wanted to buy the stocks or real estate when I get in, that's why it's cheap, but if they did, they wouldn't fear it going down as much after the run up ...


+1 


Cheers


----------



## humble_pie (Jun 7, 2009)

Guban said:


> ... If you do see that the worst is nearing or just past



clues are not even straws, just tiny miscroscopic filaments floating in the wind.

only one cmffer that i'd regard as smart has been sufficiently inspired to buy energy stocks & that was only yesterday, imho. It's possible that he nailed it perfectly. But he's been the only one.

others rushing in ... you know how they say ... where angels fear ...

me i'm a hopeless dumb crumb so i'm not buying anything yet.


----------



## Toronto.gal (Jan 8, 2010)

Just a Guy said:


> 1. *Fear of a downturn* is always in the back of my mind when I invest in anything/I usually *only pick up stocks when they are already falling for just that reason. *
> 2. You have to keep *emotions out of the equation*.....


*1.* I'm a value investor as well, but not so much for fear of downturns, but because of what I read in 'The Intelligent Investor' about always having a margin of safety for more reasons than just downturns. It was also from this book [as well as from trading], that it stuck with me the dangers of doing nothing when markets are overheated, and the need to reduce exposure accordingly.

*2.* So many make that statement, but I believe it's simply not possible for 99.9% of investors, so not sure why it's repeated so often. Emotions need to be managed, but certainly are very much part of the equation. I think that many of the fearful/nervous that don't dare to learn about investing, is precisely because they have been led to believe that there is no room for emotion.


----------



## GOB (Feb 15, 2011)

If you don't have a long term time horizon to wait out the markets, your asset allocation should be chosen accordingly. If you don't have the knowledge to this there are an endless number of financial advisors who do.

A market crash does effect everyone though. It's emotionally draining probably to even the best of investors. Take the fearless comments for what they are - the people making them are probably feeling the pain too but just not expressing it.


----------



## cainvest (May 1, 2013)

Toronto.gal said:


> *2.* So many make that statement, but I believe it's simply not possible for 99.9% of investors, so not sure why it's repeated so often. Emotions need to be managed, but certainly are very much part of the equation. I think that many of the fearful/nervous that don't dare to learn about investing, is precisely because they have been led to believe that there is no room for emotion.


I think the key point to control emotions is to set your rules before you take a position. What price are you in, out (for both loss/gain) and what is your timeframe. Of course if you're not one to stick to your own rules all bets are off.


----------



## Just a Guy (Mar 27, 2012)

Tgal, the same could be said for the rule "buy low sell high", the majority of people don't do it.

Statements like that are repeated because it's the right thing to do, people often ignore the right thing because it's difficult that doesn't make it wrong.


----------



## Eclectic12 (Oct 20, 2010)

Toronto.gal said:


> ... *2.* So many make that statement, but I believe it's simply not possible for 99.9% of investors, so not sure why it's repeated so often. Emotions need to be managed, but certainly are very much part of the equation.


I'd say for the same reason "don't spend everything one earns", "work out on a regular basis" & "eat properly" ... there are lots of examples of people who have heard the info but are clearly are doing something else.




Toronto.gal said:


> ... I think that many of the fearful/nervous that don't dare to learn about investing, is precisely because they have been led to believe that there is no room for emotion.


Interesting idea ... the conversations I've had about attempting to learn about investing have almost exclusively been around how complicated it is perceived to be. The main fear based conversations seems to have been around news reports of big index drops means one needs to dictate to the advisor to sell.




GOB said:


> ... A market crash does effect everyone though. It's emotionally draining probably to even the best of investors. Take the fearless comments for what they are - the people making them are probably feeling the pain too but just not expressing it.


While I'm sure some are ... some on the other hand have been through a series of drops where they have seen what has happened to their portfolio, know what their time frame is and as result, are doing what their plan is.

Then too, the investments bought as well as potentially re-investments could be such that the 40% drop that shocks a more recent buyer result in a much smaller impact on the portfolio.



Cheers


----------



## etfstrader (Sep 26, 2014)

WOW, there are a lot of great comments with honest opinions on here 

Another add-on comment to Just a Guy's post (Tgal, the same could be said for the rule "buy low sell high", the majority of people don't do it) is that the majority of people just don't know how to do it. If majority of them know how to do it, then Wall Street or Bay Street might go bankrupt soon as there is no lucrative money left on the table for them to make.


----------



## lonewolf (Jun 12, 2012)

It is impossible for everyone to make more money then they put on a poker table. If everyone is making more money then they put on the table it would have to be a Ponzi & a Ponzi will crash. The money will always flow to the strongest players - player. Any way you slice it there has to be a loser.

Regarding oil the seasonal cycle should bottom with in next month or 2, bear market rallies can be very swift. The way I see it the next seasonal low will take out this seasonal low.


----------



## GOB (Feb 15, 2011)

Not really true for dividend paying companies that continually return profits to shareholders. That is money being taken out of the markets, so it's not a zero-sum game.


----------



## Toronto.gal (Jan 8, 2010)

Eclectic12 said:


> the conversations I've had about attempting to learn about investing have almost exclusively been around *how complicated it is perceived to be*.


That is very true as well, but in one word, it is nothing more than fear, and it's not just fear of not being able to learn/understand [some of the people who use this excuse are very well educated, in fact]. I would rather the word disciplined/informed were emphasized, rather than 'you must be emotionless', which translates into more anxiety IMHO, hence discouragement.


----------



## Just a Guy (Mar 27, 2012)

I think keeping your emotions out of decision making is different than being emotionless...I'm emotional about my investments, I just don't let them cloud my decision making.

When you walk into a trashed rental, it's impossible to not be emotional...but my brain kicks in and says mud and paint and your back in business...

With stocks, they go up, they also go down...but generally they all go up in the long run...if you pick wisely.


----------



## Toronto.gal (Jan 8, 2010)

*JaG:* I know what you mean, but I still say that 'the brain' does NOT always respond the way we would like it to. Mine fails every now & then, because yes, some fear inevitably gets in the way, but I learn each time, so no big deal.


----------



## banjopete (Feb 4, 2014)

I'm unsure of the intent of the OP but I can't help but feel I'm being chastised for participating here without the correct background or amount of "rightness" to do so. Most of us aren't experts by any means, but what we all are is people who are experiencing the same thing and gathering to share our experiences. This is like a pressure cooked experience vault. I don't make decisions daily about my finances but I can hear about a collective group of people that are learning and experiencing through things I'm likely to/or have as well. I also don't think each post should be prefaced with a disclaimer of liability either.


----------



## PuckiTwo (Oct 26, 2011)

This is a long post - if you don't like to read it - simply click it away. I had mentioned in my 2nd post that this thread was NOT about me and MY finances. Allow me to respond to some post and points

*Financial Fear vs Pain *
Fear is a learned and from our forebearers genetically inherited sensation that made them alert. Fear gives you the ability to recognize dangers. You feel fear when a truck suddenly comes towards you - and you feel pain when the truck hits you. To _use this metaphor in investing _you need the fear to be alert of the dangers lurking in the markets and the economy. If you react - there is less pain, if you don’t react - there is pain.
So, to me “frightened = being alert”

*Retirees and/or Investors with limited means”) shouldn’t be in the markets, should restrain to GICs, etc. vsdevelop a strategy for dangerous times*
- The advice to investors that if they are frightened they shouldn’t be in the market OR resort to low interest GICs which ties your money up for years equals
( = )"putting them in a financial nursing home so that society can forget about them"

- From a 2014 standpoint of a retiree the past years did not provide much choice BUT to invest in equities unless one had a good private or government pension. Unless one drew on their hard earned capital or sat on a family fortune. What would you (the reader) think these “poor” retirees should do instead? Deplete their capital and then
become a welfare case if they live too long? That can’t be the solution! 

- I do not support the advice to hire a financial advisor. That’s only good advice if somebody has to throw money away. If you want to deplete your capital faster, that’s the way. There have been many CMF threads on the negative impact a FA can have, so we don’t need to get into this any further. 

*Instead: Businesslike Strategy to overcome fears and gain Financial Confidence*
Instead of moving retirees’ finances onto a storage rack there is a need for learning and implementing strategies in order to recognize dangers and act accordingly.

1. I do not believe in “Buy and Hold”. It is un-business-like. 
Nobody who ever owned or ran a successful business would start a business with one or more products AND then market them forever without any changes in product, marketing and distribution channels. Instead a continuously successful business needs the development of a 3-5 year research (preferrably international) and marketing plan which is being adjusted every year according to market conditions. Products, no matter how well they are presently doing need to be thrown out if there is a black streak on the horizon. Example: the IT industry is full of these dead bodies and if change in product doesn’t come early enough the company is dead.

Same applies to an investment portfolio. T.Gal, for example, posted a few years ago that she “.....runs her investments like a business”... 
Portfolio adjustments/changes in strategy need to go beyond the mere yearly re-balancing and research has to go beyond researching the innards of the companies on the alert list. A look at geopolitical and industry-specific developments inside and beyond North America and how they could influence one's portfolio and one's livelihood is needed. T.Gal, for example, posted a few years ago that she “.....runs her investments like a business”... or Tygrus’ post #10 upthread. 

Like JAG post #12 I agree with spreading your means across a wide range of possibilities which go far beyond the conservative portfolio of stocks, gics, bonds, and what not. Real estate, involvement in businesses, Pms, and foreign investments need to be part of it. Marc Faber, the doom-and-gloom guy preached this already several years ago. Buffet apparently owns vast farmlands - if the world collapses, people still need to eat. Europeans learned this the hard way during the wars - people who had land for growing food had money.

There were several strategic suggestions by Humble, T.Gal/hboy, Indexx, Synergy and others about how to protect investments - (other than the usual GIC-put-your-feet-up-tirade). 

2. Financial Literacy for adult investors:
there is an interesting opinion exchange going on upthread between T.Gal, Eclectic, eftstrader, JAG and others that “people/investors don’t know
how to....” 
Several threads on this forum dealt with the need for Financial Literacy programs for school children. Why not also for adults, for retirees? (btw, children learn better when their adults are knowledgable about what their kids are being educated about). 

This board is, in parts, a good learning tool. There are many posters who try really hard to pass on their knowledge, experience and opinion. Older investors can learn from younger ones but that also applies vice versa.

3. Patience in Finance
Humble hinted on several threads very quietly in half sentences that she “....is not buying (yet)...” I interpret Harold’s and Altared’s posts “that it isn’t over yet” (by a long shot)

Personally, I have learned a lot on this forum especially now and when I started in 2011/2012. Very informative exciting discussions. Thank you for all the valuable contributions.


----------



## Just a Guy (Mar 27, 2012)

1) personally, buy and hold has served me very well. If you pick good companies, as per your metaphor, they will change what they are doing to survive in the market, thus you won't have to change what you hold...of course, if they are a one trick pony, you may need to adjust your portfolio.

2) it's hard to teach financial literacy when so few, of the relevant population, seem to know/understand it. Of those who do, few seem to agree...just look at the flame wars on this board. I know no one I'm my family was financially literate, of my extended family, mutual funds was the best anyone else did. 

I've seen teachers try to teach stuff to my kids (stock picking competitions, the one who makes the most gains in 3 months gets an "A", which is teaching gambling), but these people know nothing themselves and it shows.

3) patience is often rewarded, but analysis paralysis isn't.


----------



## none (Jan 15, 2013)

Jesus, talk about over thinking things.

1) financial advisors can provide value. No question. Some suck - true but not all. I have an account, she's a financial advisor of sorts and well worth the piece of mind, my time and money.
2) Buy and hold can be extremely effective - particularly for index investors. If the market doesn't go up in 20 years - the stagnant market is likely the least of your worries.
3) There are so many many MANY book on financial literacy. Many WAY WAY overcomplicate things. Again, index investing is highly effective and extremely simple. It's an extended pamphlet like what moneysense has put it. It doesn't have to be more complicated than that. If you want to go there fine but the benefits are questionable.
4) Humble has no idea where the bottom is. If she misses it, it's because of unknown (and unknowable) factors. If she hits it, it's b/c she a VERY shrewed investor. see where I'm going? No offence to humble.


----------



## GOB (Feb 15, 2011)

> irees and/or Investors with limited means”) shouldn’t be in the markets, should restrain to GICs, etc. vsdevelop a strategy for dangerous times
> - The advice to investors that if they are frightened they shouldn’t be in the market OR resort to low interest GICs which ties your money up for years equals
> ( = )"putting them in a financial nursing home so that society can forget about them"
> 
> ...


If retirees are relying on consistent market growth for their expenses, then they have *not* prepared adequately or successfully for retirement. While I'm sure a few cases may be unavoidable, I believe the majority of people that find themselves in this situation probably pigged out on debt throughout their lives and bought things they didn't need and couldn't afford. I see it all around me every day. Lack of financial education is certainly a part of this, but the point remains that they cannot rely on a stable market for cash flow.


----------



## PuckiTwo (Oct 26, 2011)

GOB said:


> 1. I believe the majority of people that find themselves in this situation probably pigged out on debt throughout their lives and bought things they didn't need and couldn't afford. ,
> 2. but the point remains that they cannot rely on a stable market for cash flow.


1. This is an assumption you cannot prove. Not everybody runs up debts. 
2. that's certainly true and that is also not the point I wanted to make. Take a self-employed person who retired in the past 8-10 years on what he gained over his working life. Let's say he saved between 650K and 1Million (that was the going recommendation about 6/7 years ago how much one needed to retire). Life expectancy runs now up to 90 I believe? If he wants to live off his savings (not considering that he might need expensive medical and nursing care, simply living) without depleting his capital he needs to invest better than in a GIC.


----------



## cainvest (May 1, 2013)

PuckiTwo said:


> 2. that's certainly true and that is also not the point I wanted to make. Take a self-employed person who retired in the past 8-10 years on what he gained over his working life. Let's say he saved between 650K and 1Million (that was the going recommendation about 6/7 years ago how much one needed to retire). Life expectancy runs now up to 90 I believe? If he wants to live off his savings (not considering that he might need expensive medical and nursing care, simply living) without depleting his capital he needs to invest better than in a GIC.


One question about this statement, what is wrong with this example person depleting capital during retirement?


----------



## Eclectic12 (Oct 20, 2010)

Toronto.gal said:


> That is very true as well, but in one word, it is nothing more than fear ...


Interesting ... I have yet to get any sense of fear from these conversations. It is more a resignation. 
Pointing out that their hobby is as complicated, where they learned it over time instead of through a big bang approach returns to the same (incorrect in my view) statement.


Cheers


----------



## Eclectic12 (Oct 20, 2010)

PuckiTwo said:


> This is a long post - if you don't like to read it - simply click it away. I had mentioned in my 2nd post that this thread was NOT about me and MY finances. Allow me to respond to some post and points ...


... fair enough ....




PuckiTwo said:


> ... So, to me “frightened = being alert”


 ... where it triggers appropriate action and/or stays short of being debilitating, it is fine ... trouble is most I talk to who are fearful during troublesome times don't have any criteria for their action. As the Nike ad says, they "just do it". Most of the time, it ends up being a bad time for the action.

Tech stocks at all time highs? The advisor is only earning 18%? ... let the fear of missing out motivate buying in at the wrong time.




PuckiTwo said:


> ... The advice to investors that if they are frightened they shouldn’t be in the market OR resort to low interest GICs ...


I will have to review the thread ... my impression was that the "stick to GICs" was far outweighed by the "construct a better portfolio advice".




PuckiTwo said:


> ... I do not support the advice to hire a financial advisor...
> There have been many CMF threads on the negative impact a FA can have ...


There are people who should go through an advisor as they are terrible at DIY or don't want to take on the work. (ex. 100% in tech stocks just before the tech crash). Most CMF threads I've read are highlighting DIY versus paying the advisor and profiling bad ones.




PuckiTwo said:


> ... Instead of moving retirees’ finances onto a storage rack there is a need for learning and implementing strategies in order to recognize dangers and act accordingly ...


 ... which is what I read the "construct a good portfolio to be about" ... however, where one is no longer in the accumulation phase - this may not be easy to do.





PuckiTwo said:


> ... 1. I do not believe in “Buy and Hold”. It is un-business-like.


If I throw out some of my "buy and hold" stocks, I'm throwing out stocks that are up more than ten fold, before considering the dividend that started at 7% and has been steadily increasing. Based on the time I have available to me, I doubt I'd be able to do as well if I was trading it.

It may not be business-like ... but for some stocks, it works.






PuckiTwo said:


> ... Portfolio adjustments/changes in strategy need to go beyond the mere yearly re-balancing and research has to go beyond researching the innards of the companies on the alert list.


YMMV ... coach potatoe fans will argue that their strategy means this is all that is required.




PuckiTwo said:


> ... Like JAG post #12 I agree with spreading your means across a wide range of possibilities which go far beyond the conservative portfolio of stocks, gics, bonds, and what not. Real estate, involvement in businesses, Pms, and foreign investments need to be part of it...


Now I'm confused ... you are worried the retiree but you want them to becoming involved with managing all of this or being directly involved in businesses? 
This sounds more like someone in an accumulation stage than a retiree.




PuckiTwo said:


> ... There were several strategic suggestions by Humble, T.Gal/hboy, Indexx, Synergy and others about how to protect investments ...


Some of which are straight out of "Beginner's Guide to Investing" books that I've read over the years.




PuckiTwo said:


> ... 2. Financial Literacy for adult investors:
> there is an interesting opinion exchange going on upthread between T.Gal, Eclectic, eftstrader, JAG and others that “people/investors don’t know
> how to....”


My point is not that they "don't know" but that for a large segment - they refuse to make use of the information widely/easily available to learn.




PuckiTwo said:


> ... Why not also for adults, for retirees?


The last I checked, the local college offered five courses, the two universities offered about the same, the local library runs at least two a year, there's web sites, books in the library etc. etc.

Without people believing they can learn and/or motivation ... it is pointless. As the saying goes, one can lead a horse to water but can't make them drink.




PuckiTwo said:


> ... This board is, in parts, a good learning tool. There are many posters who try really hard to pass on their knowledge, experience and opinion. Older investors can learn from younger ones but that also applies vice versa.


Absolutely ... trouble is those who are here, AFAICT are by a large margin, in the minority.




PuckiTwo said:


> ... Personally, I have learned a lot on this forum especially now and when I started in 2011/2012. Very informative exciting discussions. Thank you for all the valuable contributions.


Yes ... thanks to everyone for the input/discussion/ideas.


Cheers


----------



## humble_pie (Jun 7, 2009)

PuckiTwo said:


> Take a self-employed person who retired in the past 8-10 years on what he gained over his working life. Let's say he saved between 650K and 1Million (that was the going recommendation about 6/7 years ago how much one needed to retire). Life expectancy runs now up to 90 I believe? If he wants to live off his savings (not considering that he might need expensive medical and nursing care, simply living) without depleting his capital he needs to invest better than in a GIC.




for some time now the old rules have failed retirees.

the old rules said move into bonds as u age - folks were supposed to use some kind of 100-minus-age formula - & then everybody would live happily ever after on their 5-8% interest incomes.

even less than a decade ago, one million $$ could have easily supported an aging individual or even an aging couple, with perhaps only an occasional nibble at the capital.

but now there are no bonds paying anything & people get excited over 5-year GIC paying 2.65 or 2.90%, which is less than what real inflation plus taxes will cost them.

there are millions of canadians in this category. More alarmingly, it is said that there will be many millions more who won't be even remotely so fortunate.

how to take care of everyone? me i can think of 2 things for starters. There are many more, of course, but for starters there's 1) japan & 2) net nanos.


1) *japan* is suffering some social dislocations, there is said to be far more poverty among the elderly than the japanese government wishes to admit. But in general, the japanese have survived for decades with near-zero interest rates, a stagnant economy & an aging population, but little social upheaval.

what can we learn from the japanese experience? people in japan are not dying of starvation or medical neglect. Japan has not gone to war. Japanese cities are not overrun with armed thugs & criminals. Something(s) is (are) holding the japanese fabric together. Me i would love to know more about the what & the how & the why.


2) *another force* i see that can ease circumstances for the not-so-well-off aging community is the internet. A friend who is a marketing expert started her own tiny consulting business a few years ago & these days she is aglow with affection & hope for her clients. Most are young business startups. Nearly all her clients are under 30. She has no traditional large corporate clients. 

to hear my radiant friend talk, one would believe that a brave new world has already emerged. War for these kids is a thing of the past, she says. The internet gives them friends all over the world, what would be the point of fighting, she asks. They're not competitive, they hang together in packs, clans & tribes, she points out. Even the video games they played as teens have helped them think faster, smarter, better, she believes (me i don't quite agree with this.)

she describes to me tiny, local, imaginative village businesses that her clients have started up, all using the net in creative ways.

where i'm going with this drift is that only a few internet startups seem to have catered to retirees & senior citizens. I don't mean *selling* them services for $$, i mean net-based initiatives that have encouraged activism, independence, solidarity, sharing, hope & help among an aging community.

here is one such nano-business my friend described: a tiny cellule of homes on 3-4 city blocks organizes itself. The residents pool their resources & determine a rough dollar value for the various services they can render to each other.

OK it's like bartering, i say. No, no! goes my friend. It's so much better than bartering, she tells me.

the members of the cellule help each other out & accumulate their inventories of monopoly dollars. Then what happens is that businesses in the same 3-4 block area - or very close by - agree to redeem the play money for a certain percentage off their regular prices, say on a monday, or maybe 15% off on certain items sold. 

these reductions are not any more than what such businesses would be offering during their regular sales, so the businesses aren't getting hurt.

the result? everyone is better off. The residents are better off for getting to know & help each other, the businesses are better off for gaining increased publicity & sales, the residents again for being able to obtain some products at promotion prices.

something as complicated as this gossamer network could never exist if it were not for the internet. Twenty years ago, the calculations alone would have killed the principals. Now everything can be handled by an app.

more & more, i think that retirement/old age should be a time of new beginnings. There could be fewer dollars, but there should be far, far richer & more creative experiences.


----------



## Eclectic12 (Oct 20, 2010)

PuckiTwo said:


> 1. This is an assumption you cannot prove. Not everybody runs up debts.


True for the current older generation ... but with debt so high, I fear it's changing.




PuckiTwo said:


> ... Take a self-employed person who retired in the past 8-10 years on what he gained over his working life. Let's say he saved between 650K and 1Million (that was the going recommendation about 6/7 years ago how much one needed to retire) ...


YMMV ... if it's a lump sum from say the sale of a business, it is a challenge. 

If money has been invested over the years, it might not be so difficult. If I were buying some of my dividend paying stock at today's prices, not only would I have 90% less shares - my income would drop by 95%. This is ignoring the income paid in the intervening years.


Cheers


----------



## Cellardweller (Jul 3, 2014)

Humble, is this what you had in mind?



> another force i see that can ease circumstances for the not-so-well-off aging community is the internet.


This is an ad from the last economist. LOL









Perfect for retirees.


----------



## banjopete (Feb 4, 2014)

PuckiTwo said:


> 1. This is an assumption you cannot prove. Not everybody runs up debts.


I don't think it's a stretch to make this blanket statement these days. People are very familiar with money lending, and very unfamiliar with money earning. Just hearing the avg household debt numbers should be an indicator, or look at the per household debt vs home price swelling over the past two decades. Our neighbours are awash in debt, not all, but most.


----------



## humble_pie (Jun 7, 2009)

Cellardweller said:


> Humble, is this what you had in mind?



nothing to do with what i was writing about in post # 45 upthread. Zero, nada, rien.

it's not about businesses, net-based or not, for retirees. It's about a paradigm shift in values. It's about new, youth-driven nano enterprises. It's about serving people where they're at. It's possible cmf forum is too retro for these.


----------



## cainvest (May 1, 2013)

banjopete said:


> I don't think it's a stretch to make this blanket statement these days. People are very familiar with money lending, and very unfamiliar with money earning. Just hearing the avg household debt numbers should be an indicator, or look at the per household debt vs home price swelling over the past two decades. Our neighbours are awash in debt, not all, but most.


I'd generally agree with this, many people (not all of course) live in the here and now without proper finanical planning for the future. 

Now fast forward to those people's (let's say ones that saved less than 1/4 mil) retirement age ... which of the following should they do,

a) increase their investment risks (out of fear) at the start of retirement hoping the stock market will bail them out
b) do everything they can to decrease spending to stretch out what little savings they have
c) continue working
d) protect what little savings they have with mainly no risk investments
e) buy lottery tickets in hopes of a better tomorrow


----------



## namelessone (Sep 28, 2012)

If people don't have 20/30/40 years of accumulation phase, then they should increase they short term bond allocation. 50% short term bond allocation cut volatility and also return almost in half. 70% short term bond allocation cut 70% etc...

Ignorance is the cause of suffering.


----------



## Just a Guy (Mar 27, 2012)

At what point does the person become responsible for their own actions?

If they don't have a long term timeline, who's fault is that? The markets are cyclical, historically this is a well known fact, so people may miss the boat.

I've know a guy who's been talking about investing for over ten years...he's turning 61 this year and still talking about it, but growing more concerned because he's approaching retirement. He has had years to build up a nest egg, but procrastinated instead, or let fear dictate his actions.

If he gets in now, on a downturn, is that the market's fault? I've been encouraging him for years to get started.

Sometimes, all you can do is watch the train wreck in progress.


----------



## indexxx (Oct 31, 2011)

Well put JAG- people need to accept responsibility for their actions or lack thereof. I tried to get my dad to start an investment plan when he still had 10-15 years of working life left but he just kept giving excuses and never did it, saying it was too late etc. I could see ahead that he would end up with next to nothing and he did; he was a commissioned salesman with no pension aside from OAS. I knew that being a bartender, I was in somewhat the same boat and took steps to ensure my future.


----------



## etfstrader (Sep 26, 2014)

indexxx said:


> Well put JAG- people need to accept responsibility for their actions or lack thereof. I tried to get my dad to start an investment plan when he still had 10-15 years of working life left but he just kept giving excuses and never did it, saying it was too late etc. I could see ahead that he would end up with next to nothing and he did; he was a commissioned salesman with no pension aside from OAS. I knew that being a bartender, I was in somewhat the same boat and took steps to ensure my future.


In my past, my dad always discouraged me to touch stock market because he believes investing/trading is no difference than gambling in casino or buying lottery tickets which he hates to see people gamble with their savings. Guess what? my parents are retiring right now and I've been partially supporting them to ensure they live in a comfortable life. As for myself, I'm very financially independent for myself as a teenager until now. I've been working very hard to make sure that my spouse and I don't have to work for a part-time job once we approach retirement ages. Yet, we've decided to leave all of our wills to charities once we pass away since we have no kids.


----------



## My Own Advisor (Sep 24, 2012)

I see JAG's point for sure, and agree with it, although some people just don't have the means to invest; they are highly disadvantaged folks but I can appreciate you are not likely talking about those individuals.

My parents continue to frustrate me now and again with their lack of savings and spending habits. They are into their 60s now. If they didn't have their pensions, they would be flat out broke. This is despite having some great jobs for 30 years.

Like etfstrader, our plan is to work hard now to allow for part-time jobs, if we want them, as we approach our mid-50s. If we don't want to work, that will be by choice and not because we have to. I suspect our personal savings rate will need to be >20% over the next 15-20 years. Our savings rate will ultimately determine if we can do this. I can definitely appreciate many people have little choice when it comes to savings (those are very low incomes) but then again many Canadians do.


----------



## Just a Guy (Mar 27, 2012)

You know, I really don't buy the "people don't have the means" arguement.

I started investing when I had next to nothing, I couldn't work, I had little savings, no prospects, a family to support, a wife who was also unable to work, no programs which I could qualify for (like EI, welfare, insurance, etc..) and no other options. I was literally very close to rock bottom.

I literally couldn't afford to make a mistake. Let me tell you, that situation is a good teacher.

Now I often work with the disadvantaged, the mentally ill, the disabled, etc. I look at all the programs they get to help them and shake my head. Yes, their lives aren't great, but they are given a lot, way more than I had.

While I wouldn't suggest that anyone go through what I did, perhaps we are making life a little too good for people to the point where it's comfortable enough to remain status quo. For people to change their situation would cause them pain from their current position for the promise of future benefits...not something most people would be willing to do. When your in pain however, you get to the point where you'll do almost anything to make it stop. 

I speak from experience here, it works with both physical and situational pain. Many of the people I met in recovery are addicted (in my opinion) to the pain killers they were given and they still have severe problems physically. Personally, I've got a high resistance, to drugs so I avoided them as much as possible and looked to solve the problem instead of masking it. Many times the first reaction was take these meds, I kept asking them to look for the cause. Eventually I found people who could help. I'm not 100% recovered by any means, but I've gotten a lot better than some of the others I was with.

Perhaps our society is creating financial drug addicts...give them enough to dull the pain, even though it takes away the desire to fix the problem.

By the way, this whole idea just came out in this posting...I hadn't thought about life in this way before.


----------



## Rusty O'Toole (Feb 1, 2012)

Just a Guy said:


> At what point does the person become responsible for their own actions?
> 
> If they don't have a long term timeline, who's fault is that? The markets are cyclical, historically this is a well known fact, so people may miss the boat.
> 
> ...


Well JAG old boy I started taking responsibility for my own actions in 1967 when I was 16 years old. That is when I began to map out a plan for retirement, no kidding.

I figured at that time, $200,000 invested at a conservative 5%, would give you $10,000 a year which would be ample for anybody. I should point out, in 1967, $10,000 would buy you a couple of Cadillacs, and would be equivalent to $150,000 to $200,000 in today's money.

For years I invested in real estate, paying 9% to 12%mortgage interest every month. Now I have money to invest where is my 9% or 12%? Sorry, the bank might give you 2% on a GIC if you are lucky.

Do you know what 2% is? 2% is nothing. If you had a million dollars to invest, and you put it in the bank at 2% you would get $20,000 a year in interest, or $384 a week.

Do you look at someone who makes $384 a week and say "there goes someone with a millionaire's income" because that is what it is.

Now tell me Mr. Hot Shot where does someone like me invest safely for income, and retire in dignity with a life's savings of under $1 million? And how many people manage to save up more than that for their retirement?


----------



## Just a Guy (Mar 27, 2012)

Why did you sell your real estate? It would have been paid off by now giving you a serious, inflation protected cash flow. 

I probably read the same type of retirement books you did...though much later. I personally never bought into the "have savings" plan for retirement. When I looked at investing, I saw that interest goes up, but is also comes down. Maybe I just benefitted from a world that was much more unstable, and always questioned conventional wisdom.

Realizing that, my investment strategy was always based on cash flow. Everything I buy has to pay me. 

My businesses are designed for cash flow, my real estate is based on cash flow and my stocks are based on cash flow. I don't even look at single digit expected returns (case in point I only bought BMO when the dividend was 10% and even then I did it to be conservative). 

Interest rates have been low for years, but you stuck to your investing strategy...didn't you see what was happening?

Personally, I always monitor my investing strategy, if I see a need to change it, I will. 

You seem to have achieved your goal, but you didn't change based on the climate you were in. Why do you feel you deserve to preserve your capital? A million dollars should last you for many years even if you have to draw it down. Your plan didn't allow for capital preservation, that was your mistake. 

You could try bank stocks are paying close to 5% as a dividend right now, but people consider it too risky. In fact you could probably do something more risky with 100k of your money and still live well.


----------



## Eclectic12 (Oct 20, 2010)

Just a Guy said:


> You know, I really don't buy the "people don't have the means" arguement ...
> Now I often work with the disadvantaged, the mentally ill, the disabled, etc. I look at all the programs they get to help them and shake my head. Yes, their lives aren't great, but they are given a lot, way more than I had.
> 
> While I wouldn't suggest that anyone go through what I did, perhaps we are making life a little too good for people to the point where it's comfortable enough to remain status quo. For people to change their situation ...


YMWV ... based on observation, I doubt my mentally handicapped brother would ever be able to adjust his situation to the point of being able to save/invest.

It is moot anyway as were he able to do so, having over the limit in his bank account cuts what he gets by a disproportionate amount. AFAICT, a lot more would need to be overhauled than simply providing info.


Cheers


----------



## Rusty O'Toole (Feb 1, 2012)

Just a Guy said:


> Why did you sell your real estate? It would have been paid off by now giving you a serious, inflation protected cash flow.
> 
> I probably read the same type of retirement books you did...though much later. I personally never bought into the "have savings" plan for retirement. When I looked at investing, I saw that interest goes up, but is also comes down. Maybe I just benefitted from a world that was much more unstable, and always questioned conventional wisdom.
> 
> ...


Can you not give a straight answer? If you must know, small town rental real estate is too management and labor intensive, and doesn't pay the way it used to. I want to retire, and invest my money in something that does not create headaches all the time.

I thought a few rentals would give me a safe income too, and it used to , if you have time to deal with knothead tenants, local political appointees, and every other kind of mooch and busybody on the planet Earth. Not so much anymore though.

So, buy bank stock @ 5% is your answer?

And what do you mean, do something more risky?


----------



## james4beach (Nov 15, 2012)

My Own Advisor said:


> No doubt *downturns like these* can destroy folks retirement savings.


Everyone, there's something I'm not understanding about all the feverish posts lately.

The TSX is still virtually at all time highs. "Destroy" retirement savings?? It hasn't even dropped, in the big picture. Here's a graph of XIU.

What am I missing here? Why so much pain? I presume some people have specific high exposures to oil and miners, is that what we're really talking about?


----------



## My Own Advisor (Sep 24, 2012)

Someone heavy in O&G stocks james4beach, might, not say they will, start selling out of fear. If they are close to retirement age, this is not a good thing. This is all I'm saying.


----------



## Just a Guy (Mar 27, 2012)

Eclectic12 said:


> YMWV ... based on observation, I doubt my mentally handicapped brother would ever be able to adjust his situation to the point of being able to save/invest.


A good friend of mine has a brother who was born with a brain tumour. He's legally blind and very handicapped. Has been living on the government program his entire life.

He also has a house fully paid for (done in his early 20's), and a good portfolio too...don't know if it was him or his family though...the who family has done well financially through investing, so it may have been others or inheritance. He does live frugally though as he doesn't have a lot of wants.


----------



## Just a Guy (Mar 27, 2012)

Rusty O'Toole said:


> Can you not give a straight answer? If you must know, small town rental real estate is too management and labor intensive, and doesn't pay the way it used to. I want to retire, and invest my money in something that does not create headaches all the time.
> 
> I thought a few rentals would give me a safe income too, and it used to , if you have time to deal with knothead tenants, local political appointees, and every other kind of mooch and busybody on the planet Earth. Not so much anymore though.
> 
> ...


Sorry, I thought I was clear, but trying to say things nicely...

To be more clear, you seem to have achieved your investment goals. Those goals were faulty. They may have been valid when you started, but you ignored the changing reality. You want free money, with no hassles...that doesn't exist anymore, we're not in the 50's...that went out the window sometime in the 70s or 80s, but you chose to ignore it. We don't have defined benefits, cost of living adjusted annuities (unless you believe the low inflation rates are real), or high interest rates and haven't for decades.

You chose to ignore the changing landscape, and didn't adjust. You sold your assests which would have generated the income you wanted because they are too much work...now you want me, or society to fix the problem...well, it can't be done. You should have changed years ago. If it makes you feel better, you're better off than many others who seem you have the expectation that everything will be taken care of at the end for them...

Just because you started to invest at a young age, doesn't automatically mean you did it right. Just because someone buys a property, doesn't make them a real estate investor. Many people on this forum try to overpay for properties and I try to talk them out of it. If they ignore me, not much I can do about it. Just because they did something, doesn't mean it'll work.

To me, investing has always been work. The more I worked, the more it made. You want to avoid work, so you'll make less according to that theory.

What would I do I your situation? I don't really know as, after being broke once, I've done a lot since to avoid the situation again. With your timeframe, you ether eat up your savings and hope they last (read Die Broke), or gamble I guess and hope you land on black. Maybe buy a Tim Horton's franchises...I hear you need around $500k in assets and they produce $120k/year on average. It's not my style of investing, though I know guys who've done well with it. At this point, you don't get the luxury to choose anymore though...you had that chance, but the time has passed.


----------



## hboy43 (May 10, 2009)

Rusty O'Toole said:


> So, buy bank stock @ 5% is your answer?


I think this is the answer, more or less. Add a few companies in other sectors. My portfolio is currently yielding 4.3% but will be heading lower next year I am sure (Norbord is expected to cut). What is absolutely indisputable is that FI reaping all of 2% loses as you already noted, guaranteed.

It is a bit late to help you though isn't it? You likely have a lifetime mindset of "stocks risky, bonds safe", so will likely have a very hard time going to an equity based retirement plan. Yet even for you at age 63 (+-) you have an expected life of over 20 years yet, so in fact (barring some undisclosed issue that drastically reduces your life expectancy) are investing "long term".

What is a risky asset class anyhow? How does stock risk rank with RE risk and FI risk? I argue that the ranking is context based. Sometimes stocks are riskier than bonds which are riskier than RE. Sometimes bonds are riskier than RE which is riskier than stocks. What factors play into the context? Time the money is needed is prime. Age, job stability, pension, personal disposition (say then buy high sell low types).

What has happened recently is an influence too. The reality, though few see it this way, is that buying oil stocks now is less risky than it was 6 months ago. The truth is that nobody saw the oil crash 6 months ago, and nobody can tell you when it will recover. The only fact known for sure is that oil is now ~$60 and 6 months ago it was ~$100, plus all the trickle down revaluations that follow from that, that is the stock prices of oil companies. Everything else is guess and speculation.

Personally, my context has for the last 20 years or so that I have paid attention is that RE is riskier than bonds which are riskier than stocks. This is based on the following facts:

Long term return averages: RE ~4%, bonds ~6%, stocks ~8%,
We don't spend or need much
My wife has a nice pension coming
I have the disposition for the wild swings of stocks and my wife does not pay any attention
We are currently ~50 years old, so always been investing for the long term
The house is modest and paid for
The recent RE gains have been spectacular, which for many say safe but for me say risky (inverted oil price scenario)
RE is not diversified pretty much by definition: a small number of units in a small number of locales with a small number of tenants
Canadian stocks are tax advantaged compared to FI
and likely others that escape me now

My experience the last dozen years has been fantastic in the range of 10% PA average, albeit non linear (hello 2008/09). IAD = indicated annual dividend at year end, not actual dividends which would be less about 10 or 15% due to dividend increases and more shares purchased during the year etc.

metric 2002 2013 now

Stocks $256K $1765K $1714K
IAD 5646 59994 74491
yield 2.2% 3.4% 4.3%

Other factors: Savings from employment about $30K annually. A spare house that was owned in 2002 was sold in 2010 (or was it 09?) for ~ $270K net. Leverage 2002 ~100K (no immediate records, so a bit of a guess, might even have been zero, 2005 records say $120K), 2013 $316K, now $400K. My dividend now includes $17760 annually from Norbord. So I invite the readers to adjust the raw figures to suit themselves, for I agree the raw figures are misleading.

Let's compare what was owned in 2002 vs now:

2002 22 issues
AL - bought out
BCE *
BMO *
BNS *
BBD.B *
CAE *
CWL.A *
CM *
EMA
FTS
GAC bankrupt
HBC bought out
HZI
LER.B bought out -> RUS *
MX *
NT bankrupt
NTL.PR.G bankrupt
NCX bought out
PCA bought out -> SU *
PD
RND bankrupt
SNC *

Now 26 issues

ADW
ACO.X
BMO *
BNS *
BTE 2014
BCE *
BBD.B *
CAE *
CWL *
CM *
COS 2014
ECA
EMP.A
GE
HSE
IGM
JNJ
MFC 2014
MX *
NBD
POW
RUS *
SNC *
SU *
TCK.B 2014
T

Some four of the 2002 issues I held to bankruptcy. Some of them were bought out. The ones marked 2014 are new positions this year. The ones marked with an asterisk were both owned in 2002 and presently (including buyout conversions). Not necessarily continuously, but at least 7 or 8 of them would have been. 

People often say stocks are for the long term. Few actually hold stocks for the long term, I mean what is the average holding period, under a year? I clearly practice this as almost half my portfolio has at least a 12 year history. The average history over my lifetime would be some number like 7 or 8 years I expect. The average number of trades annually for both my and my wife's accounts (ie about 10 accounts) over 30 years is about 6.

Now one can come up with various reasons why my experience is not typical or fair, and I am sure. Some will see my four bankruptcies and say "see I told you stocks are risky" and completely miss the point that in the aggregate over time with the right context stocks are not risky. Some will say I am lucky. Are 4 bankruptcies an indicator of good luck? The largest gain in dollars I have is with MX. Is it really luck that in 08/09 I bought more at $19, $17, and $8 (slightly under the price of the first buy some 10 years prior) or is it just paying attention and acting on my convictions? I have merely laid out my thinking, my actions and my results for your consideration.

hboy43


----------



## Toronto.gal (Jan 8, 2010)

Eclectic12 said:


> 1. *There are people who should go through an advisor* as they are terrible at DIY or *don't want to take on the work. *
> 2. *Based on the time I have available to me,* I *doubt I'd be able to do as well if I was trading it.* It may not be business-like ... but for some stocks, it works.


*1.* This is a very important statement, as I think there are some people that have no time/believe short-cuts can be taken/or that portfolios can be put on autopilot without adjustments. Some on this forum have even encouraged to just drop their FAs, because investing requires little knowledge/time [for a couch potato style investing, for example, which I don't believe is the case]. No matter one's strategy/age, settings need to be altered, especially for those without a long-time horizon. Adult financial literacy/interest has greatly improved, but as you mentioned, the majority are simply not interested in DIY. Financial literacy does require lifelong learning, and a commitment that's not for everyone.

*2.* Yes, based on *your*time, but Pucki2 was talking about those that do *not* have such a time to recover. Also, when she said she did not believe in 'buy & hold', I don't believe she was talking about trading, but about making adjustments based on market conditions, and those adjustments need to be made in good & bad times.

Speaking of the oil crash, which brought about this thread, someone recently put it as *'you don't know what you've got till it's gone'*, and isn't that precisely what happened to some investors? Oil stocks had been on a tear, what did people do about that? Just last week I was ridiculed for saying that I trade oil stocks, and not sure why this would be silly to do when oil is the most volatile & traded commodity of all.


----------



## PuckiTwo (Oct 26, 2011)

Toronto.gal said:


> *1.**2.* Yes, based on *your*time, but Pucki2 was talking about those that do *not* have such a time to recover. Also, when she said she did not believe in 'buy & hold', I don't believe she was talking about trading, but about making adjustments based on market conditions, and those adjustments need to be made in good & bad times..


Thank you! That's exactly what I meant when I said (in reference to one of your posts several years ago) that if you do DIY you need to treat it as a business - and that means a plan which has to be re-visited consistently - not twice a year.

Sorry, I haven't participated in this thread lately because I have huge problems with TDW and the Norbert Gambit. (posted that in a new thread).


----------



## Pluto (Sep 12, 2013)

PuckiTwo,

Your post is titled moral hazards, so I am thinking that the essence of your message is about some type of moral obligation. 
I do believe that people have a moral obligation to others, and to themselves. In the context of investing, I suppose that means replies to questions from beginners should be thoughtful and care should be taken not to lead them astray. In terms of an obligation to oneself, that means learning and taking responsibility for one's decisions. 

As to the people who were delighted by the fall in oil, my opinion is is they are on the right track, although some are/were perhaps a bit to eager to buy (too early). Also I see some avoidance of separating the wheat from the chaff. Some of the most successful investors ever identified excellent companies but didn't buy a single share until the industry was in disarray, then plucked the gems out of the rubble. So I'm sorry you are frightened about this oil debacle as it is presenting an opportunity to buy better value - not to say that it can't get even better. I didn't own any oil companies prior to the recent problems because there were no problems and it was a fully valued, don't worry be happy industry. Ho hum. Now it is interesting. 

Come to think of it, the market as a whole has been recently a don't worry be happy market. To me that's worrisome. I doubt my worry will dissipate until after a serious correction or bear market. Currently the dominant narrative is interest rates are low, real estate is high, so stocks are the only game in town. I don't buy the latter phrase, and I'm about as sure as I can be about anything, those who believe it, and are fully invested in stocks, are in for a serious downsizing in their assets. The crowd is essentially fully invested, so I depart from the crowd. 

I don't believe in buy and hold forever. Buy on bad news, sell on good news. So the gems in the oil industry are on my radar. - ie buy on bad news. I'll hold them for as long as it takes for the industry to recover. For example, right now drillers/explorers are cutting back. Years from now, when oil has recovered, and exploration is expanding, I'll start thinking of selling - sell on good news. 
I don't believe in diversification in stocks. It is over rated as a safety feature, and requires one to buy into mediocre areas just for the sake of diversification. If I was diversified, I would have already owned oil stocks before the plunge. Yuk. 

Getting back to your moral theme: I agree people should be sincere in their replies to honest questions.


----------



## Eclectic12 (Oct 20, 2010)

hboy43 said:


> ... People often say stocks are for the long term. Few actually hold stocks for the long term, I mean what is the average holding period, under a year? ...


Hmmmm ... some do turnover their stocks frequently but except for day traders, I'm not sure the average is this low.
I'd be interested in any reports indicting this.



Toronto.gal said:


> ... *2.* Yes, based on *your*time, but Pucki2 was talking about those that do *not* have such a time to recover ...


I was meaning "time" in the sense of each day where I have to see/plan what I want to do, review it from a due diligence perspective, have access to make that move and not be sidetracked by the rest of daily life.

If we are talking recovery time, where some " ... do not have 20/30/40 years of accumulation phase before them", I believe I'm in the same category as I have 9 years of accumulation left.


Cheers


----------

