Head In The Sand
Head In The Sand
I have been accused of sticking my head in the sand, I have been called unsophisticated, and unwordly, and even uneducated. How can I try to deny it? I have heard the proclamations and know what Jack Bogle and Vanguard said. The doomsday scenarios are all over the internet. The US market will have subpar returns over the next decade. Say goodbye to the gains that we are used to. Hello 3-5%
Run. Run they say. Take your money out of index funds and do something different. The recommendations are vague and varied about where the money should actually go.
And I have been ignoring it all.
Why?
Doomsday Scenarios
As long as there have been bulls, there have been bears. Naysayers and doomsday clairvoyants are nothing new. From the first day of a stock market upswing to the last, there will be someone whispering that the world is ending. Tell me something I have never heard.
I believe, ultimately, in the US economy. I believe that eventually our stock market will continue to climb. Index funds are still my best way to bet on the market as a whole. 3-5% returns over the next decade wouldn’t be catastrophic. But negative returns from trying to time a market I don’t understand, would.
The truth is that none of us know the future. Jack Bogle didn’t. Vanguard doesn’t. And neither do I. It’s quite possible that we are all wrong. I’m sticking my head in the sand because sometimes it is not worth listening to the background noise.
Diversification
The stock market may bring suboptimal returns. This is one of the reasons that I have diversified a significant portion of my portfolio outside of the market. My real estate holdings account for about a third of my net worth, and allow for significant cash flow.
I am still a participant in the business asset class. I can comfortably stick my head in the sand when my doctoring corporation still brings in six figures a year. I also collect various fees for consulting and speaking engagements.
On top of that, good or bad, I still receive dividends and interest on the idex funds and bonds in my portfolio. Even in meh markets, I have a certain amount of cash flowing in every month.
Enough
And lastly, I worked long and hard to accumulate more than enough. For everyone that number is different. For some it is saving 25X annual spending. For others it is 30. I am very comfortable with my number and feel it should maintain in even the most fiercely poor environments.
Furthermore, flexibility is always a possibility. Both my wife and I have marketable skills, and can move in and out of the workforce as needed. We also live on a fairly padded budget that could be cut down drastically if needed.
Final Thoughts
I am sticking my head in the sand because I don’t want to spend endless hours studying up on a stock market that may or may not suffer in the future. It will probably both soar and plunge at times.
Vanguard can only guess. But I can diversify, save more than enough, and maximize the business asset class.
I’m hoping that I will be just fine.
Looks like a great way to go. I also have some choices. Believe markets are going to be having some problems, believe returns will be lower for the near future, and P/E ratios are fairly high, too high for my tastes. I have another option. My real estate, which cash flows enough to support my life style, carries 7.25% leverage. Today I’m choosing to pay that down instead of investing in more stocks. Guess I’m lucky to have a known 7.25% return on my money. Never thought that would be a good thing. I’m not slowing down in my investments, just changing the direction for now. Here’s to hoping the market doesn’t suffer too much.
You certainly can toggle between asset classes to try to hedge the market. It is still somewhat speculative, but at least an educated guess.
I believe in the US economy too. Even if we have a setback, we’ll recover. If not, we’ll have a lot more problems than just money.
Of course, diversifying is a good idea. I’d like to get some acreage in HI at some point. That will be my fallback for the doomsday scenario.
Yep. We just keep on betting long term on the US economy. I suspect it will be OK