LEROY JENKINS

Been presented with a 5 year money vehicle that is intriguing. Curious what the smart money guys here think (and the rest of us as well).
Basically would you be willing to take 75% of the gains from the S&P 500 the next 5 years, but not lose any principal on any down years. Obviously it's a hedge that back of the napkin math seems like you'd be betting on at least one 10% correction year 2 or 3 or some combination.
Normally I'm really risk tolerant but I'm not seeing any encouraging market based decisions from our new government. Hard to be positive especially after such a good run. Feels like we're due a correction.
Hoping to hit my retirement goal ($3M) early in 5 years around age 55. Need about 8% return with normal 401k contributions. TIA

NuGuy

Did you sell your real estate in Blackrock Mountain? You still running the Whelp farm? How’s the chicken?

Trip7

S&P 500 is at nose bleed valuation according to the Shiller CAPE ratio. Expected Return over next 10 years is less than 5%. Think about investing your money in broad ETFs diversified over over multiple asset classes, with a tilt towards Emerging Markets. Emerging markets and Foereign Developed markets have better CAPE valuations and outlooks. Personally in a static portfolio rebalanced quarterly if have less than than 20% of my equities allocation in the S&P 500

Not investing advice DYODD

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LEROY JENKINS

That's pretty close to what I have currently. 1/3 emerging markets and 1/3 in S&P funds. Only thinking about doing this for that piece. Agree that valuations are sky high. Been aggressive and long-viewed my entire life and it's served me well. Struggling with transitioning that mindset now that I'm getting close. 5% expected return the next 10 years the juice isn't worth the squeeze. Basically its a bet between slow growth or a volatile correction. Maybe some good medium risk municipal bonds. Lot of borrowing to shore up budgets.

Trip7

Municipal bonds are a good option. In the search for yield also consider MLPs. Entire sector was left for dead last March providing opportunities that provide sheer outrageous value. EPD is best in class with an outstanding balance sheet and just under 9% yield currently. Similar tax benefits to Real Estate partnerships.

Outstanding explanation of MLPs can be found here:

https://www.simplysafedividends.com/...tnerships-mlps

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sailingfun

These deals sound attractive but often costs are accounted for after the guaranteed return much like annuities. Make sure you understand the costs they will be charging and how the accounting works.

mispoken

First; if this makes you comfortable you should do it. Finding the right risk is personal. Just realize you give up returns in exchange for that perceived safety. If you’d done this over the last decade it would have cost you a significant amount of money. Also take into account any fees for the “professional management” of this vehicle, that too erodes your returns further.

You say we are due for a “correction” (is the market currently wrong?), but we already know this WILL happen. The market as we know it, wouldn’t exist without this feature. It’s a good thing. This is the risk that provides us outsized returns compared to your savings account. If the thought of your balance going down 25% sometime in the next 3 years makes you ill, perhaps the account you mention is good for you. Something I like to do to keep perspective is look at where a 25% “crash” would leave us, date wise. If SPY, currently at 390 dropped 25% today it would take us down to about 290 or roughly May 2020 levels. If ones tactic is to avoid corrections, you can accomplish this by sitting out and waiting to jump in at the next correction, but you missed out on everything leading up to May 2020, so what did you REALLY gain? This is why methodical investing and sitting on your hands really works.

I don’t put much stock in “valuation”. These are often talking points for CNBC talking heads and are irrelevant. Many high growth, successful companies are missed because people think these metrics are fortune tellers. And, often people avoid the market completely when some magical metric throws up a “red flag. I always like to ask what a “fair valuation” is when someone’s says something is overvalued. It’s a fun question because this it is impossible to answer. Do we look at an average p/E of the market over the last 10 years? If we are doing that, why aren’t we looking at the average return of the market too? If we did that, I’d say the better bet is on the average return of the market versus an average ratio of the day.

Best advice I can give; ignore metrics, methodically invest in what makes you comfortable, avoid minute to minute ticks up and down, sit on your hands. If you do this through up and down markets, in the end this method works. If an investment vehicle with a guarantee of no loss makes you sleep better at night you should do it. But, consider what you give up in exchange for that.

And always remember, NKA; nobody knows anything.

ERflyer

When asked which direction the stock market would move,
J. P. Morgan replied, “It will fluctuate.”

notEnuf

Anyone hear a timeline for our new MBCBP? I was hoping to pare some risk with this and put more into my retirement.

Tailhookah

Someone said the market is due for a correction... so the 52 week low of 18,213.65 wasn’t a correction? The market has been due a major correction since 2010 or before. If I had listened to Mad$$ or another hack on TV (they’re on TV because it’s a sweet deal where they don’t have to perform... like a TV weatherman) I’d have missed out on a massive upswing in the market.

Our market has been “overvalued” many times before and we saw it plunge back in 2Q/3Q 2020. But the recovery has been amazing... the market is resilient and the Oracle of Omaha preaches investing in quality stocks for the long haul.

So when someone says we are “due” for a major correction, I just sigh and continue to stay invested.