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Bull Run

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Hey Bull, the majority of our portfolio is the same as it was before all this virus and other political stuff. As I mentioned before:

Our annuity pays a guaranteed 7.5% per year, no matter what the market does. So, the principal amount invested has doubled twice since 2002. Doesn’t sound as exciting compared to a 20% market return for a year of investments in a 401K or stock, but the next year in those investments could be a loss, and they are the killer years. For example, if an investment loses 50% in one year, it would need to gain 100% in the next, just to break even. The only thing one can do instead of cashing out and realizing the loss, is to buy more at the reduced price so the portfolio will recover quicker, (if you still have faith in the investment).

Yes sir, it's difficult sometimes to explain to an investor how powerful the "time value of money" is and how it works.

"Trends" can sometimes be a powerful tool for investing as I mentioned before:

Since the time I posted (the above) in March, burial services has performed pretty good – (HI), (CSV), (SCI), and (MATW).
Thanks for the update. Are you a more of a growth, dividend growth income (DGI), or income type of investor?

I have more than a couple of decades to go before I hit the traditional retirement age, so my retirement accounts are almost all in stock index funds, as I don't believe I can beat the market over a long period.

However, my non-retirement account's more DGI and income oriented as I'm trying raise enough passive income to be financially independent before hitting 46. I love my current career field and don't intend to retire early but I also heard that older folks in IT/Cybersecurity field have harder time findings jobs after a layoff due to senior positions being harder to come by, and junior positions are full of young professionals willing to work long hours for less pay.

Anyhow, with that background, I snagged some CVS and JNJ stocks during their minor dips as a COVID play, but need to take a look that the stocks you listed.

7.5% guaranteed for annuity is pretty darn good, so if you don't mine me asking, who did you get that with? I'd normally not go with an annuity but 7.5% is close to the average market return, but without the risk.





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Bull Run

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a chart of his stock is not an indication of compounding. dividends paid and re-invested is more akin to compounding.
The often quoted average market rate of return of 8% (pre-COVID) includes dividends reinvested, and reinvested dividends account for 75% of returns (75% of S&P 500 Returns Come From Dividends: 1980-2019), so it's absolutely fair to include dividends to the total return. Also note that Berkshire Hathaway stock doesn't pay dividends so while many companies it holds pays dividends, investors holding its stock do not receive dividends to reinvest in the first place.

This isn't something that I made up but rather a commonly accepted calculation for total return. You may have your own way of calculating returns but why reinvent the wheel?

If you haven't sold your position you haven't 'gained' squat. Good for you the utterly deranged market has served you well. Sell while the selling is good and make your gains real. Then if you think this insanity is just going to keep ticking, you can buy back in and risk a new batch of capital. As we've seen 30% losses in a day or two across the broad spectrum is entirely possible if not likely. The covid "recovery" should never have happened. That the FED intervened is not 'market sentiment' it's out and out rigging. Glad you got lucky.
It's called unrealized gain/loss. Yes, it doesn't mean I locked in my gains as it can go up or down (thus the roller coaster comment), but if you can't handle large swings in stock price, you shouldn't be in stocks anyways. There were additional dips recently and I fully expect more to come. You made the right move if you cashed out if this market exceeds your risk tolerance as it prevents panic sale.

S&P 500 index over the last 6 months
1608581282855.png


However, for DCA investor like me, I'll continue to invest regardless of dips or highs and how's in the office. This has nothing to do with luck, rather I posted that I will continue DCAing during the dips. The term DCA been around for years so it's not something new or secret. In fact, most of the people with 401Ks are already doing it even if they don't realize it.

Yes, the Fed intervened to prevent a crash similar to 2008. I believe part of the increase in stock prices are due to inflation via all the "money printing". However, this also means that you are losing money on any cash held due to the same inflation.

I was only a few years out of college when 2008 crash happened and while I don't have much to lose, the hit still stung. But I stayed put while many others jumped out. The spike up happens as fast as the spike down, so those people who jumped out missed on big gains by the time they jumped back in.

While past performance doesn't guarantee future returns (if you want guaranteed returns stick with DCs or treasuries) but the history shows that people who jump in and out of the market tend to lose money in the long term. And a good portion of my investment has a time horizon of 20+ years.
 

shogun32

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And a good portion of my investment has a time horizon of 20+ years.
I'm not arguing against DCA. Just remember buy-and-hldrs of the Nikkei are still not back to parity despite waiting over 28 years.
https://www.macrotrends.net/2593/nikkei-225-index-historical-chart-data

True, the FED has been incredibly "accommodating" of market distortion and figment of imagination-based valuations.

Or say Cisco stock took 19 years to get back to parity.
https://www.macrotrends.net/stocks/charts/CSCO/cisco/stock-price-history

You could be waiting a VERY long time to get your money back.
 

bjstang

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it's hugely unrealistic. There's no way to 'safely' get those kind of returns.
You are wrong. Look it up for yourself. Many I was associated with have been locked in at 7% or better guaranteed returns for the past twenty years. As I mentioned a while back, many have offered me kudo's for getting their loved one (and still getting) a great rate.

7.5% guaranteed for annuity is pretty darn good, so if you don't mine me asking, who did you get that with? I'd normally not go with an annuity but 7.5% is close to the average market return, but without the risk.
United Investors Life fixed annuity (not variable with fund options). The fixed portion in a variable doesn’t pay as much interest. Most life insurance companies will sell a fixed annuity (takes an insurance license only), but in order to offer variable annuities to a client, the agent must have both the series 6 and 66 license, and then they can set you up with either type. Most financial planners have the series 7 as well. Back in the day I maintained all three. This investment was made as to take minimal risk (protected by insurance groups if one folds, SPIC instead if FDIC) to start withdrawing an income 20 plus years after the investment.

Haven’t looked, but I doubt you can find an annuity that pays even close to a 7.5% guaranteed rate right now. When inflation eventually takes hold again and interest rates on bank CD’s go up considerably, you will find fixed annuities paying great rates again.
 

shogun32

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but I doubt you can find an annuity that pays even close to a 7.5% guaranteed rate right now.
you won't because nothing that is similar to the risk profile of US Treasuries or AAA corp debt has been yielding over a few % for 20 years. The SPIC is a fantastic farce. It doesn't remotely have the funds to cover all the inbound insolvency.

Sure back 20-30 years ago 5-7% was a somewhat reasonable rate to quote. Because back then the investment grade instruments were yielding more than that and the legacy holdings were also well north of the figure. But as each rolls off it can only be renewed at the then-current rates which has been plumetting below 3% and is now a pathetic 1% if not less. So the annuity company is getting poorer by the day and eating their previously banked earnings to pay current withdrawals. Even if we got 8% yielding instruments tomorrow it would take 10-20 years to get back to surplus because all of the shitty return vehicles have to roll off first.

Or they play "ponzi" by getting as much new investment as they can to stay afloat long enough in the hope that the interest rates come back in enough time to stop the bleeding. Or they switch investment classes to stocks and other more risky/speculative assets to shore up the capital base. Maybe they get lucky, or maybe they crash and burn when the stock market sees a proper >50% correction if it's going to have even a passing relationship with the real economy.

What kind of company doesn't have their fund prospectives available for public inspection?
 

bjstang

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you won't because nothing that is similar to the risk profile of US Treasuries or AAA corp debt has been yielding over a few % for 20 years. The SPIC is a fantastic farce. It doesn't remotely have the funds to cover all the inbound insolvency.
I haven't and will never buy a government bond.

If a fixed annuity or insurance company fails, it's taken over by others. That's the law and it's worked for many years. SIPC works in a similar way.

it's hugely unrealistic. There's no way to 'safely' get those kind of returns.
Of course there was, and now I see you must agree by posting your statement below.

Sure back 20-30 years ago 5-7% was a somewhat reasonable rate to quote.
Below these two statements of yours is my reply to both.

So the annuity company is getting poorer by the day and eating their previously banked earnings to pay current withdrawals. Even if we got 8% yielding instruments tomorrow it would take 10-20 years to get back to surplus because all of the ....... return vehicles have to roll off first.
Or they play "ponzi" by getting as much new investment as they can to stay afloat long enough in the hope that the interest rates come back in enough time to stop the bleeding. Or they switch investment classes to stocks and other more risky/speculative assets to shore up the capital base. Maybe they get lucky, or maybe they crash and burn when the stock market sees a proper >50% correction if it's going to have even a passing relationship with the real economy.
The insurance companies has had it figured out for longer than you have been alive. Call it a "ponzi" or just how the rules work which are explained upfront to the customer. They are making jillions on those who purchase whole-life insurance by the way. Annuities are only a small part of an insurance company’s portfolio of products.

My 25-year pension from another employer is a type of annuity as well. When I retired, they pay me a monthly amount for the rest of my life and if I die, my wife will get the same amount for the rest of her life, (called a pension but it operates the same as an annuity with a joint-life payout, payments continue after death to the annuitant's spouse).



If my wife or I live longer than the average life expectancy, say to 100 years old, the pension loses money on my payouts. On the other hand, if the couple dies the day after retirement, that’s it, the money stays in the pension to pay those that live longer. Heirs receive no payouts from the pension.

Annuities have a many choice on how they pay-out, single-life, double, with excess left for heirs, etc.… For those that choose payouts on a single life expectancy, they will receive a larger per month basis because the payments stop upon the death of the annuitant. Once again, that money is used to pay those to live longer. It's why they spend so much time with "life expectancy tables" and payout amounts are determined by the tables.

Fixed annuity companies are making money hand over foot right now with the monies taken in. They are paying out or guaranteeing a low rate and from the monies taken in, they are making plenty for the company. Variable annuities don't work that way, the customer choosing the investment options is at the mercy of the market, no guarantees.

What kind of company doesn't have their fund prospectives available for public inspection?
Don't know of one.
 
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shogun32

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My 25-year pension from another employer is a type of annuity as well. When I retired
Given your age and when you got your policy, all of your 'insurance underwritten assets" were booked when the going was good. Anybody today can't remotely get the same deal. Insurance companies are only allowed to invest in certain types and grades of investments. Those investments have been earning bupkis for well over a decade.

Fixed annuity companies are making money hand over foot right now with the monies taken in.
they may be getting new customers but their investment returns are seriously screwed. Unless they are investing in stocks and broadly "got lucky". The housing debacle wasn't to save the housing industry, it was to save the insurance companies and your annuity from being a giant black hole of nothingness. The investments many an "insurance" company was holding were worthless and if they had to realize the loss, the average-joe annuity would be a figment of your imagination.

For a busted insurance company to be taken over, the new owner has to have capital to make it work. Or the Fed takes all the crap and puts in on their books to hide the truth, while the 'cream' is sold off. If you think the SPIC is going to survive a systemic problem, you're delusional. Ditto the FDIC. None of these so-called safe-guards are real except at the tiny margin. To actually rescue them the Fed is going to be forced to sell bonds if they're lucky to find anyone stupid enough to buy them, or more likely, just print to infinity.
 
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bjstang

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Given your age and when you got your policy, all of your 'insurance underwritten assets" were booked when the going was good. Anybody today can't remotely get the same deal. Insurance companies are only allowed to invest in certain types and grades of investments. Those investments have been earning bupkis for well over a decade.
Keep some dry powder in excess of emergency reserves. What goes around comes around, and although I can't tell you when, inflation will rear it's ugly head. Interest rates will rise and insurance companies will guarantee 2 - 3 points above a bank CD, someday. It's not a get rich quick deal, but twenty years later you will have a smile on your face.

They do have a place IMHO in ones portfolio.
 

shogun32

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They do have a place IMHO in ones portfolio.
sorry if I gave the impression they don't.

I can't tell you when, inflation will rear it's ugly head. Interest rates will rise and insurance companies will guarantee 2 - 3 points above a bank CD, someday. It's not a get rich quick deal, but twenty years later you will have a smile on your face.
problem is actual inflation is about 5-7% (and in some segments over 10%) and has been for some time. The "official" figures are out and out lies designed to mislead the clueless public. Bank CDs are basically short-term or 1-3yr treasuries minus fees and expenses. Though some invest in corporate or municipal paper. So to beat CD's the insurance co has to invest in things that "reliably" do better than treasuries and enough to pay everybody's commissions, salaries and corporate footprint, some profits, and of course policy redemption. When interest rates are zero-bound they are in broad terms royally f*cked and we've been at zero for what, 15 years?

The minimum interest rate should be 7% or north of that to impart a rational metric to the time value of money, but the US economy would go into a serious redux of the Great Depression. So even though it will heal the patient once and for all, the doctors (FED, Congress, USGovt) insist on coming up with ever more novel ways to put bandaid and dressings on cancer and hope the patient can survive just above a persistent vegetative state.
 

bjstang

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See you added some edits to your last post. I'll do my best to provide some answers for you.

they may be getting new customers but their investment returns are seriously screwed. Unless they are investing in stocks and broadly "got lucky". The housing debacle wasn't to save the housing industry, it was to save the insurance companies and your annuity from being a giant black hole of nothingness. The investments many an "insurance" company was holding were worthless and if they had to realize the loss, the average-joe annuity would be a figment of your imagination.

For a busted insurance company to be taken over, the new owner has to have capital to make it work. Or the Fed takes all the crap and puts in on their books to hide the truth, while the 'cream' is sold off. If you think the SPIC is going to survive a systemic problem, you're delusional. Ditto the FDIC. None of these so-called safe-guards are real except at the tiny margin. To actually rescue them the Fed is going to be forced to sell bonds if they're lucky to find anyone stupid enough to buy them, or more likely, just print to infinity.
"they may be getting new customers but their investment returns are seriously screwed."

The insurance company investors are doing just fine, they win more than they lose, it's how they stay in business.

"Unless they are investing in stocks and broadly "got lucky".

The group doesn't invest with hope, dreams, or luck, it's a determined and thoughtful process.

"The housing debacle wasn't to save the housing industry, it was to save the insurance companies and your annuity from being a giant black hole of nothingness. The investments many an "insurance" company was holding were worthless and if they had to realize the loss, the average-joe annuity would be a figment of your imagination."

Different type of insurance company that had nothing to do with my annuity. The only way my annuity could be worth "nothing" is if the US dollar were to collapse and be worthless. The stock market is the life-blood of the economy, if it collapses, better be holding hard silver and gold.

"For a busted insurance company to be taken over, the new owner has to have capital to make it work."

Yes, that's how it has worked for decades.

"If you think the SPIC is going to survive a systemic problem, you're delusional.

No delusion here, lol.

Ditto the FDIC. None of these so-called safe-guards are real except at the tiny margin. To actually rescue them the Fed is going to be forced to sell bonds if they're lucky to find anyone stupid enough to buy them, or more likely, just print to infinity."

If you don't trust the SPIC, FDIC, or the Fed, buy land and precious metals.

You got the last part right, the Fed won't let it fail. Although, I'm not the least part worried about my annuity failing.
 
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bjstang

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sorry if I gave the impression they don't.


problem is actual inflation is about 5-7% (and in some segments over 10%) and has been for some time. The "official" figures are out and out lies designed to mislead the clueless public. Bank CDs are basically short-term or 1-3yr treasuries minus fees and expenses. Though some invest in corporate or municipal paper. So to beat CD's the insurance co has to invest in things that "reliably" do better than treasuries and enough to pay everybody's commissions, salaries and corporate footprint, some profits, and of course policy redemption. When interest rates are zero-bound they are in broad terms royally f*cked and we've been at zero for what, 15 years?

The minimum interest rate should be 7% or north of that to impart a rational metric to the time value of money, but the US economy would go into a serious redux of the Great Depression. So even though it will heal the patient once and for all, the doctors (FED, Congress, USGovt) insist on coming up with ever more novel ways to put bandaid and dressings on cancer and hope the patient can survive just above a persistent vegetative state.
Inflation can eat a CD profit in nothing flat.

"Churning" a stock portfolio in a taxable account can do the same, even worse with broker fees.

An annuity growing tax free with no other added fees or charges and a paying a rate of 7.5% per year looks pretty good on a market drop like the one after 9/11.
 

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Thanks for the update. Are you a more of a growth, dividend growth income (DGI), or income type of investor?
For the most of my working years I was in aggressive growth and speculation. DCA in my company plan for 25 years in addition to a pension, IRA, Roth IRA, 529, rent houses, etc... DCA bi-weekly for me was put in aggressive mutual funds when the market was low, some monies switched to fixed DCA when the market was high. When the market hit a really nice drop in value, I would transfer the money from fixed to the aggressive funds, DCA went back into the funds as well. It's like Buffett says, buy the market when nobody else wants it. When you see your co-workers going to fixed, invest in the funds.

After my retirement from that job it was a quick 180 degree turn to long term and as safe as possible investments with the bulk of my stuff.

There has been some growth and income investments made for the kids.
 

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Life insurance products can have important place in a diversified portfolio. People should not be talking stock bonds or insurance but all of the above plus real estate and even your business
 

Bull Run

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it's hugely unrealistic. There's no way to 'safely' get those kind of returns.
That's why I asked who he got it from. Granted, even if the rate is true, there's still a residual risk of the company going out of business but unless it's a unknown highly risky company, 7.5% is pretty good.
I'm not arguing against DCA. Just remember buy-and-hldrs of the Nikkei are still not back to parity despite waiting over 28 years.
https://www.macrotrends.net/2593/nikkei-225-index-historical-chart-data

True, the FED has been incredibly "accommodating" of market distortion and figment of imagination-based valuations.

Or say Cisco stock took 19 years to get back to parity.
https://www.macrotrends.net/stocks/charts/CSCO/cisco/stock-price-history

You could be waiting a VERY long time to get your money back.
I totally agree with you on the risk one takes with certain individual stocks, and thus most will be better served with investing in market index based funds like SPY. Also, if you are picking individual stocks, it's also easy to counterargue as for every stock like CSCO, you have also other tech stocks like AAPL, AMZN, etc.

Also, CSCO pays a generous dividend for a tech company (current forward yield of ~3.2%), which isn't reflected in the chart. So if you kept buying through the dips and reinvested the dividends, you'll still be ahead, just nowhere as close as high flyers mentioned above.
 

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