Investing megathread extravaganza

[DaFace]

A place to talk about investing stuff.

[Peter Gibbons]

Originally Posted by Buehler445

Wait. Are you only getting 3% returns?

If you are, definitely knife that fool.

Fortunately no - I have been doing much better than that on my own. I have been closer to 10 percent overall average or 7-8 after inflation over many years. However, as I consider moving to a professional money manager, they all seem to think those types of returns are not sustainable over a long period of time (although that has been my experience for the past 25 years).

[HonestChieffan]

Originally Posted by Peter Gibbons

I would be curious to know what rate of return do you use for you post retirement investment portfolio projection?

It’s the time of the year that I meet with some investment professionals and consider my retirement plans, investments, estate planning, etc. I’ve noticed that many bigger firms (UBS, Merrill, etc) are being very pessimistic in their return projections for even growth balanced portfolios post retirement. Most have assumed overall rates of return below 3% after inflation adjustments. In my personal projections I am much more optimistic in my assumptions of around 6-7% after inflation.

What do you think: am I overly optimistic or are the financial planners overly pessimistic? Something in between? Something else entirely?

I’d love to hear your perspective.

Merrill will project about 3-4 but keep in mind as a retiree, they will want you strongly diversified and your risk tolerance lower. I enjoy a great relationship with my Merrill guy and they can give you a ton of options and looks as you get near to pulling the plug.

[Rain Man]

Originally Posted by Peter Gibbons

I would be curious to know what rate of return do you use for you post retirement investment portfolio projection?

It’s the time of the year that I meet with some investment professionals and consider my retirement plans, investments, estate planning, etc. I’ve noticed that many bigger firms (UBS, Merrill, etc) are being very pessimistic in their return projections for even growth balanced portfolios post retirement. Most have assumed overall rates of return below 3% after inflation adjustments. In my personal projections I am much more optimistic in my assumptions of around 6-7% after inflation.

What do you think: am I overly optimistic or are the financial planners overly pessimistic? Something in between? Something else entirely?

I’d love to hear your perspective.

Originally Posted by Buehler445

I think 3% after inflation is a pretty historic number.

May not be applicable these days because I’m sure that number was negative with the huge inflation in the 70s. Plus most of these outfits have traditionally moved to bonds which right now are returning ass. So it might be closer than you think over a lifetime following traditional rules.

I’d tend to be more conservative for retirement. Fools don’t need to be running out.

I want to plan for surviving trouble, so I'm assuming (pre-inflation) a 7 percent return prior to retirement, and then after retirement a 5.5 percent return on IRA funds (which I'll tap last and thus have a longer time horizon) and a 3.5 percent return on other savings that will be tapped first. I recognize that this is very conservative, but I don't want to be 80 years old and hit a bump like we had last April where I lose 30 to 35 percent of my savings and get really stressed out.

However, I also agree with Peter about grimacing over bond returns. It really rankles me to accept a lower return over a long period of time just to avoid a shock risk. I wonder if my risk tolerance would keep me from doing it, but I also know that I should go with lower returns in exchange for lower risk.

One thing that I keep telling myself is that even if I retire at 65 I'll still have a 20 year time horizon or longer (I hope). So it points against being too conservative. I'll likely do some sort of risk ladder where the money that I'll need in 20 years will remain more aggressive.

[Buehler445]

Originally Posted by Peter Gibbons

Fortunately no - I have been doing much better than that on my own. I have been closer to 10 percent overall average or 7-8 after inflation over many years. However, as I consider moving to a professional money manager, they all seem to think those types of returns are not sustainable over a long period of time (although that has been my experience for the past 25 years).

Makes sense.

I'd guess you won't achieve the same returns as you diversify out of stocks. So maybe don't knife them just yet.

But I would ask them their fee structure. If you don't like what you hear, a lot of outfits have target dated funds, you could do the math and split your current savings into the requisite funds.

[philfree]

So I bought stocks after the market crashed from covid and have pretty much doubled my money. With a Biden administration and a Dem win in GA the capital gains tax is guaranteed to go up. It will probably double or more. Also the Dem win in GA will probably cause a sell off. That scenario along with the fact that I probably won't be able to duplicate that investment performance anytime soon gives me pause. So with all that I'm thinking about selling all my stocks before Jan. 1 2021. Which is like today.

Is that the right move or would it be a **** up?

[Rain Man]

Originally Posted by philfree

So I bought stocks after the market crashed from covid and have pretty much doubled my money. With a Biden administration and a Dem win in GA the capital gains tax is guaranteed to go up. It will probably double or more. Also the Dem win in GA will probably cause a sell off. That scenario along with the fact that I probably won't be able to duplicate that investment performance anytime soon gives me pause. So with all that I'm thinking about selling all my stocks before Jan. 1 2021. Which is like today.

Is that the right move or would it be a **** up?

If you sell within a year of purchase, you're paying short term capital gains tax, which is notably higher than long term capital gains tax. Unless you thing something is going to happen really fast, you're better off waiting a few months and selling a year after you bought it.

Here's what the difference is: https://www.investopedia.com/article...-tax-rates.asp

[philfree]

Originally Posted by Rain Man

If you sell within a year of purchase, you're paying short term capital gains tax, which is notably higher than long term capital gains tax. Unless you thing something is going to happen really fast, you're better off waiting a few months and selling a year after you bought it.

Here's what the difference is: https://www.investopedia.com/article...-tax-rates.asp

I was wanting to go long with these stocks but if the Dems win in GA the tax rate is going to go up and then that will probably cause a pretty good sell off. It's a dilemma.

[Buehler445]

Originally Posted by philfree

So I bought stocks after the market crashed from covid and have pretty much doubled my money. With a Biden administration and a Dem win in GA the capital gains tax is guaranteed to go up. It will probably double or more. Also the Dem win in GA will probably cause a sell off. That scenario along with the fact that I probably won't be able to duplicate that investment performance anytime soon gives me pause. So with all that I'm thinking about selling all my stocks before Jan. 1 2021. Which is like today.

Is that the right move or would it be a **** up?

I think it is unlikely they'll get something passed that will affect 2021 taxes. I could be wrong. It took Trump a year to implement his stuff.

Plus, you'll be looking at Short term Gain on the stock sales, which isn't as favorable. Here is an article that explains the difference, then the tax rates which are based off AGI.

https://www.investopedia.com/article...-tax-rates.asp

Spoilered for DC stuff

Spoiler!

As much as they all talk about it, Wall Street pays the bills in DC. There haven't been aggressive tax hikes on cap gains rates in awhile. They've moved around, but not enough to change your strategy.

You're best bet is to follow your system, make the most money you can and pay the assessed tax.

Managing your trading strategy around uncertain tax circumstances is usually spending dollars to chase dimes.

[philfree]

I guess I need to practice the "Strong Hands" approach and just hang on. I already have a lot of Capital Gains to pay from the sell of some rental properties so I really wasn't wanting to add to it. I'm just and Uneasy Rider with Joe and then Kamala waiting in the wings. The Dems could really **** shit up.

[Buehler445]

Originally Posted by philfree

I guess I need to practice the "Strong Hands" approach and just hang on. I already have a lot of Capital Gains to pay from the sell of some rental properties so I really wasn't wanting to add to it. I'm just and Uneasy Rider with Joe and then Kamala waiting in the wings. The Dems could really **** shit up.

I really want to keep DC out of this, but structurally, very little has changed in taxation in the 25 years I've been paying them. They've monkied with the brackets, limits, credits, whatever, but the overall structure hasn't changed a TON.

Now, that doesn't mean that they can't implement changes that will dramatically affect your situation, but w/r/t cap gains, there is a fairly low probability. Let's be real here. There has been a ton of money made in the stock market over the last 4 years. And the current group, above all else wants to get re-elected.

[philfree]

Originally Posted by Buehler445

I really want to keep DC out of this, but structurally, very little has changed in taxation in the 25 years I've been paying them. They've monkied with the brackets, limits, credits, whatever, but the overall structure hasn't changed a TON.

Now, that doesn't mean that they can't implement changes that will dramatically affect your situation, but w/r/t cap gains, there is a fairly low probability. Let's be real here. There has been a ton of money made in the stock market over the last 4 years. And the current group, above all else wants to get re-elected.

DC? Sure but who gets elected can have an effect on the market so at times it may be hard to talk about one and ignore the other. And Joe says he's going to raise taxes so I don't know what could be more pertinent to the discussion. None the less I'll leave it there.

[Buehler445]

Yeah, I'm not particularly qualified to speculate on the election's effect on stock prices.

[lewdog]

Originally Posted by philfree

DC? Sure but who gets elected can have an effect on the market so at times it may be hard to talk about one and ignore the other. And Joe says he's going to raise taxes so I don't know what could be more pertinent to the discussion. None the less I'll leave it there.

Stock market performance hasn’t been shown to correlate with who’s in office. Over time there’s a slight edge in stock performance with a Dem in office actually, but it’s not much.

Instead of outright selling you could set stop limit orders or lock in profit on 50% of you position and leave the rest to run if the market continues to climb higher.

[philfree]

I'm just kind of thinking out loud on here and I appreciate the feedback.

[lewdog]

Originally Posted by philfree

I'm just kind of thinking out loud on here and I appreciate the feedback.

The market is extended but doesn’t mean it can’t keep running for a bit. There will be a correction at some point but it’s likely to be unrelated to who’s in office.

If worried, protect your capital with stop losses to avoid huge downside risk but place them far enough away that it doesn’t trigger selling currently.