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I thought people would like to know how I did following his stocks (I did Saul for a while and then switched to Bear). I have done it for a full 5 years. I put in a small amount of money, and when it went way up, I sold my original investment, and just played with house money. I calculated my returns and returned 11.85% CAGR.

On one hand that is great. Many people thought they had found the path to retirement at age 35 put all their money into his stocks, right about the time he lost 68.4% of his money in one year.

It truly is a tragedy that people lost their life savings.

However, if I had bought VOO, my return would have been 13.25% CAGR. Even though I was not doing the work of listening to conference calls, analyzing the businesses, financial statements and industries; there is so much buying and selling every month that it is a lot of work to do worse than just owning VOO.

I have a good amount of my money in index tracking ETFs, I have a few newsletters that beat the market, and where I really shine, thanks in part to the mechanical investing group, is in fixed income. Preferred stocks, and close end bond funds, so I don’t feel bad about my performance.

If you look at the top 10 holdings of VOO it is almost the exact same stocks as QQQ, VONG, FCNTX and many others. The differences are mainly in the weightings.

META
NVDA
BRK-A/B
MSFT
AMZN
AAPL
GOOG
AVGO

I have cut to the chase in some accounts and invested in just those companies instead of the ETFs.
Of course, the trick is to know when to STOP concentrating in that handful of names. But everybody, all these funds, will have the same problem at about the same time.

I think this comes under the heading of
"Put your eggs in one basket and then watch that basket." -Andrew Carnegie

Are you missing TSLA?

One thing that both Saul and Warren Buffett have in common is that they both got rich with highly concentrated portfolios. Buffett recently had 50% of his equity holdings in just one stock: Apple. And Saul usually holds only 8 or fewer stocks.

Saul's track record

During the 18 years from 1989 through 2007, Saul achieved annual returns of 32% compounded, which would put him in the ranks of legendary investors like Buffett, Peter Lynch, and Stan Druckenmiller. He retired early in 1996, thanks to his investing prowess.

More recently, from 2017 through 2021, Saul achieved a total return of 1,877% in only 5 years. That's not a typo. If you started with 100K in Jan 2017, found Saul's board, and followed his buys and sells each month, you would end with $1,877,570 in December 2021, as long as the money was in a tax deferred account. That's a compounded annual return of 80%.

Reference: https://discussion.fool.com/t/knowledgebase-2019-p...

Saul and Buffett's drawdowns

You know what else Saul and Warren have in common? They both experienced 50% drawdowns twice in their decades-long investing careers. People holding Berkshire Hathaway saw it decline 50% during 1998-2000 and it also declined 54% during 2008-09. Saul experienced a 62% decline in 2008, and a 68% decline in 2022. None of these events are "tragedies" for investors who know the risks of holding a concentrated basket of stocks and therefore allocated only a portion of their total assets to this particular basket.

Achieving financial independence

I don't mean to spread FOMO by describing Saul's track record above. Achieving financial independence is much simpler.
1. Start investing early, preferably in your 20s
2. Live below your means, max out your 401K contributions each year, and allocate 100% of that to an index fund
3. Let that compound and grow tax deferred. It's amazing how many people don't know the mathematical power of compounding.
4. Don't get cute and try to time the market.
5. Once you hit your retirement number, set aside N years of living expenses in cash or cash equivalents. The number N depends on what each person finds comfortable, I recommend 3 to 5 years. The rest can be split between an index ETF and a bond fund. At this point, 4% of your liquid assets should be able to fund your annual living expenses. Consult with a professional financial advisor if you're not sure about how to manage your nest egg.
6. Enjoy your retirement. You've earned it. Don't look at your portfolio every day or every week.

4. Don't get cute and try to time the market.
5. Once you hit your retirement number, set aside N years of living expenses in cash or cash equivalents. The number N depends on what each person finds comfortable, I recommend 3 to 5 years. The rest can be split between an index ETF and a bond fund. At this point, 4% of your liquid assets should be able to fund your annual living expenses. Consult with a professional financial advisor if you're not sure about how to manage your nest egg.
6. Enjoy your retirement. You've earned it. Don't look at your portfolio every day or every week.

I'm kind of at this stage. Been investing MI style for more than 25 years, and I think I've done well. But it's been frustrating lately. My returns have been barely above zero cumulatively for the last three years, and in the last 12 months I've trailed the S&P index about 23% to 31%. So while it's fun to manage a portfolio and buy individual stocks, I've been asking myself why continue to bother with it. I'd be much better off in SPY.

Elan

Saul's track record

During the 18 years from 1989 through 2007, Saul achieved annual returns of 32% compounded, which would put him in the ranks of legendary investors like Buffett, Peter Lynch, and Stan Druckenmiller. He retired early in 1996, thanks to his investing prowess.

More recently, from 2017 through 2021, Saul achieved a total return of 1,877% in only 5 years. That's not a typo. If you started with 100K in Jan 2017, found Saul's board, and followed his buys and sells each month, you would end with $1,877,570 in December 2021, as long as the money was in a tax deferred account. That's a compounded annual return of 80%.

A couple points. Investing performance is like catching a fish. It is extremely common to exaggerate it. I read his knowledge base also, and I saw numbers like 25% and 30%. Now, normally, I would not believe this, but Saul is exceptional outside of investing. He went to Harvard Medical School, and has written at least 12 books on French. He sounds like a genius. What I mentioned is verifiable. Given his IQ, I do believe he has had incredible returns.

However, I disagree with your other point. There is an incredible amount of trading. He is essentially a swing trader. Since, he could sell and buy something else the day after his report comes out, you would not get his returns. If you look at Bear, his portfolio can turn over 80% in a month.

Your other points about investing are spot on.

I'm kind of at this stage. Been investing MI style for more than 25 years, and I think I've done well. But it's been frustrating lately. My returns have been barely above zero cumulatively for the last three years, and in the last 12 months I've trailed the S&P index about 23% to 31%. So while it's fun to manage a portfolio and buy individual stocks, I've been asking myself why continue to bother with it. I'd be much better off in SPY.

Appreciate your honesty. It is honesty that allows others to make good decisions. It is inflated returns that causes people to lose money. When I followed screens, I trailed SPY. Just a quick tip, use VOO, not SPY. The same fund, but a lower expense ratio.

-- On one hand that is great. Many people thought they had found the path to retirement at age 35 put all their money into his stocks, right about the time he lost 68.4% of his money in one year.


LoL.. that was me!
But it was .5% and well worth considering what I learned since then and the path it has taken me on. The idea that one would put 'life savings' into it is very disappointing though. But, 5 years is a small sample size - if you hit it right at the bottom of an NVDA ride to the top, the experience would have been different?

-- I have cut to the chase in some accounts and invested in just those companies instead of the ETFs.
Of course, the trick is to know when to STOP concentrating in that handful of names. But everybody, all these funds, will have the same problem at about the same time.


If they are all the same invested - and will have the same problems - why bother?

---- Achieving financial independence

I don't mean to spread FOMO by describing Saul's track record above. Achieving financial independence is much simpler.
1. Start investing early, preferably in your 20s
2. Live below your means, max out your 401K contributions each year, and allocate 100% of that to an index fund
3. Let that compound and grow tax deferred. It's amazing how many people don't know the mathematical power of compounding.
4. Don't get cute and try to time the market.
5. Once you hit your retirement number, set aside N years of living expenses in cash or cash equivalents. The number N depends on what each person finds comfortable, I recommend 3 to 5 years. The rest can be split between an index ETF and a bond fund. At this point, 4% of your liquid assets should be able to fund your annual living expenses. Consult with a professional financial advisor if you're not sure about how to manage your nest egg.
6. Enjoy your retirement. You've earned it. Don't look at your portfolio every day or every week.




I figured the simpler part out a bit late and got a late start, but I essentially ....

Lived below my means (Goal was to budget on a Minimum wage salary) which allowed me to save approximately 65% of my take home. Terrified of the market unfortunately so did not fully invest in the market, but 11 years later I can live off a 3-4% withdrawal rate if I had to, but I don't so at this point I can put the retirement stash on auto pilot with index funds and increase my life style spending and still take some educated risk on the investing front.


Don't mean to digress from the topic - but hopefully someone reads and get inspired to keep it simple, slow and steady.. :)

My returns have been barely above zero cumulatively for the last three years, and in the last 12 months I've trailed the S&P index about 23% to 31%. So while it's fun to manage a portfolio and buy individual stocks, I've been asking myself why continue to bother with it. I'd be much better off in SPY.


The market has been dominated by a handful of certain stocks for the last few years. If you were not heavily invested in those 8-12 stocks then it would have been very very difficult to beat the indexes.

Here is a comparison of VONG, QQQ, VTV (value index), and SPY for the last year.
https://testfol.io/?d=eJy9j0FPwzAMhf%2BLz5mUbQihnh...

Last 10 years: https://testfol.io/?d=eJy9j0FLxEAMhf9LzrMwXUWkZ%2F...

Last 14 years (limited by VONG): https://testfol.io/?d=eJy9j0FrwzAMhf%2BLzi443SjD57...


Tech and growth (seems that almost all growth was tech) have been the places to be for a long, long time.
They all beat even a perennial favorite, BRK.

If they are all the same invested - and will have the same problems - why bother?

Why bother what?
Investing in the various similar indexes? Or investing in those specific stock?

I have alluded to my answer. Watch the basket closely.

Of course, that is only a portion of my total holdings. Don't put ALL your eggs in one basket. In case you aren't as smart as you think you are. ;-)
Always ask yourself, "But what if I am wrong?"

Yeah, that just shifts the problem to a different level. Having the right balance between large enough investment to make a significant gain but not so large that it is a significant risk.

The market has been dominated by a handful of certain stocks for the last few years. If you were not heavily invested in those 8-12 stocks then it would have been very very difficult to beat the indexes.

I have invested in those 8-12 stocks, probably more than their weight in the S&P, and I've let my winners run, and I still have been trailing the index.

Elan

I've been asking myself why continue to bother with it. I'd be much better off in SPY.

That sentence is often improved by adding:
"...for results ending right now".

In strong bull markets, especially those during which very-large-caps are in the lead, doing anything but cap-weight indexing looks foolish. The numbers show it. Only the Bogleheads look good. We have been living through such an era lately.

But that does not describe all market conditions. It's not fair to say that "what goes up must come down", but multiple expansion is a reality, and sometimes multiple contraction is a reality too, so it's not an entirely false saying either.

Since the recent bull market has been so strong, valuations are stretched by almost any metric, so it seems likely that at some point cap-weight indexing will be a very bad idea. Maybe soon, maybe not, but definitely at some point. To get a decent return, or even a less-worse return, will then require other strategies. Assuming one wants to have a less-worse return, of course.


Definition of a secular bull market: indexers look smart.
Definition of a secular bear market....?

Jim

I'm going to repeat what I wrote earlier, re-worded a bit.

Achieving financial independence and then investing during retirement

Phase 1 - Your wealth building years (pre-retirement)

1. Start investing early, preferably in your 20s
2. Live below your means, max out your 401K contributions each year, and allocate 100% of that to an index fund
3. Let that compound and grow tax deferred.
4. Don't get cute and try to time the market. Don't panic sell.
5. Ignore anyone or any article that says the market is "overvalued". They don't know YOUR time horizon. Your time horizon could be 25 years, 15 years, 10 years, 5 years - they don't know.
6. Consistency is key. Keep the index fund investments from your paycheck on autopilot. Yes, it's boring. You don't need drama or excitement to get rich.

Phase 2 - Investing during retirement

7. Once you hit your retirement number, set aside N years of living expenses in cash or cash equivalents. The number N depends on what each person finds comfortable, I recommend 3 to 5 years. The rest can be split between an index ETF and a bond fund. At this point, 4% of your liquid assets should be able to fund your annual living expenses. Consult with a professional financial advisor if you're not sure about how to manage your nest egg.
8. Enjoy your retirement. You've earned it. Don't look at your portfolio every day or every week.

Mechinv
To succeed at investing, your emotional fortitude counts vastly more than your intellectual acumen.

Achieving financial independence and then investing during retirement

This post should be on the Retirement board, not this board.

Anyway. #7 is wrong. set aside N years of living expenses in cash or cash equivalents. I recommend 3 to 5 years.

That's the "3 bucket strategy", which has been totally debunked. It does not do what people think it does for them. It is merely an illusion of safety, but doesn't provide any safety.

The right way to handle it is simply maintain your chosen asset allocation. When you withdraw money, do it proportionately from stocks & bonds so as to move toward your AA.

When stocks are down -- which is what people are afraid of -- you would be selling bonds, not selling stocks. The fear of "having to sell stocks when stocks are down" is empty--you won't be selling stocks.

That's the "3 bucket strategy", which has been totally debunked.

The intention of the cash portion in retirement is to avoid Sequence of Returns Risk (SORR).

There's a pretty good argument for a bucket strategy at

https://www.theretirementmanifesto.com/is-the-buck...

including some simulations.

This is what one of the author says:

"From my personal experience (having used The Bucket Strategy for the past 4+ years of my retirement in both a bull and bear market environment) it’s a sound strategy for the retiree who wants an easy-to-manage system for funding their retirement spending needs. Is it the optimal solution? According to Karsten, perhaps not from a strictly mathematical perspective. But, when combined with the ease of understanding and implementation, it becomes the winner in my book."

However, if you want to start your retirement with no cash buffer because you think the bucket strategy is nonsense, go right ahead. It's your money.

I have invested in those 8-12 stocks, probably more than their weight in the S&P, and I've let my winners run, and I still have been trailing the index.

That's because sectors other than megacap tech have also been getting the love this year. Check out Financial Services (XLF) up 20%, Communication Services (XLC) up 18% and even Utilities (XLU) up 20% this year.

https://www.sectorspdrs.com/sectortracker

Outside the S&P 500, you have homebuilders (XHB) up 19% and some individual retail and restaurant stocks doing very well. I'm looking at you, ANF (up 59%) and Sweetgreen (SG) up 64% YTD.

This has been my better pick of the year.

iShares MSCI USA Quality Factor ETF (QUAL)

Total: 129 (Long: 129 | Short: 0)
Top 10 39.33%
Other 60.67%

Giant 42.87%
Large 39.53%
Medium 17.35%
Small 0.25%
Micro 0.00%

Top 10
Company Symbol Company Name Holdings Percentage
NVDA NVIDIA Corp 5.96%
AAPL Apple Inc 5.61%
MSFT Microsoft Corp 4.74%
V Visa Inc Class A 4.03%
MA Mastercard Inc Class A 3.92%
LLY Eli Lilly and Co 3.85%
META Meta Platforms Inc Class A 3.66%
UNH UnitedHealth Group Inc 2.86%
COST Costco Wholesale Corp 2.42%
JNJ Johnson & Johnson 2.30%

GD_

I'm with Rayvt on not having a cash bucket, unless you have some definite rules on when to use the cash and when to replenish.

If you are using $x per month in retirement, where do you take the $x from? If you take from your cash bucket, you no longer have n years of cash. Does that mean you sell stocks/bonds to replace the cash? If you take from your portfolio, why have the cash bucket?

Perhaps you take from the cash bucket if the monthly return is negative? If the monthly return is negative, perhaps you take from the stock portfolio because you think the trend is going to continue??

I think, no cash bucket.

Aussi

The intention of the cash portion in retirement is to avoid Sequence of Returns Risk (SORR).

Correct. But it does not accomplish that.


if you want to start your retirement with no cash buffer because you think the bucket strategy is nonsense, go right ahead. It's your money.

In fact, I did. I retired in 2007, right in the face of a big bear market.

"From my personal experience (having used The Bucket Strategy for the past 4+ years of my retirement in both a bull and bear market environment) it’s a sound strategy for the retiree who wants an easy-to-manage system"

Okay, this is dumb. A 4 year test is too short to be meaningful.

From your link, Karsten had it right: "A diversified portfolio with rebalancing: withdraw from positions that fell less."
He is not the only or the first qualified person who has said this.

Here's the problem in a nutshell:
1) Refilling the cash bucket after you draw from it.
2) In a multi-year bear market, what happens after you've withdrawn the entire cash bucket? Your portfolio is FAR down, much farther down than it was in the first year you tapped the cash bucket. But now you HAVE to sell from your portfolio. Instead of having sold 10% down you now have to sell at 25% down.

There are plenty of proposed answers about refilling the cash bucket. They are all handwaving rules. When you run the rules with real historical data, none of them work. None.

When you tack on all these withdraw and refill rules, it is NOT simple and easy. What *is* simple and easy -- and easy to understand -- is doing the portfolio withdrawal and rebalance. If stocks went down, you sell bonds. You don't do the dreaded "sell stocks when they are down."

Anyway..... a while back I did a simulation using actual data, data is from 1960 to 2015. You can change the parameters for starting year, asset allocation, number of years of withdrawals in cash bucket, and 5 different refill methods.

Feel free to download it and run different numbers to see how it all ACTUALLY worked.

https://www.dropbox.com/s/xf4ma5blug27aws/SPY_With...

I never bothered to update it to include the data after 2015. The results were so conclusive that it seemed unnecessary. Maybe I'll do that someday.


This discussion belongs in the Retirement Investing Board, not here.

===========================
when combined with the ease of understanding and implementation,

It is to laugh. It doesn't pass the "explain it to your mother" test.
Rebalance & withdraw is easy to explain and understand.
Rules for when and how much to withdraw from the cash bucket, and when and how to refill the cash bucket are not.

Go ahead, write the rules down in a spreadsheet and see how complex it is.

I am just reading this off my broker's statement. My 5-year return as of Aug 31 was 11.58% over my benchmark of S&P 500 index. It had been a bull market after all, but I beat the index by a decent margin looking back to any period (which is > 25 years).

I am a very concentrator investor. My biggest 2 positions constitute 73% of my portfolio and the biggest 5 constitute 90% - 1 technology (Apple), 3 financials, and 1 retail. I held investments for very long term and the top 5 all had triple-digit-percentage returns (Apple is now close to a 10-bagger in 8 years ... I bought right before Buffett did). I do have a few tiny positions for developing more familiarity on potential interests or to make experimental bets in new areas. But it's only so many I can follow because I don't want to spend my whole life just tracking markets. I ignore the general market 'cause I can only concentrated on small selective circles.

I think focusing on understanding the business prospects is much more important than digging through or predicting the last few % on the financials. I consider the downside of an investment more rigorously than the upside before I take a substantial position, and continuously seek opposing opinions for consideration during the holding period. I am generally more comfortable with company having low debt, decent growth, and high ROE via business moats. I believe that would more readily help to bail me out of a bad situation or more likely for time to work in my favor.

Lately (the last 5/10 years) I rarely lost a big amount (more than 10%) on my bigger positions (i.e., top 10). I have a relatively low pain threshold.

My latest error is ULTA. I took the position earlier in the year before Berkshire did but then started to feel uncomfortable with the prospect but didn't get out quick enough. I lost money getting out but I was glad I learned something useful for myself.

I don't copy anyone and try to think independently in my own frame. I think investing is quite a personal thing and different people have different strengths/weaknesses and different circumstances. I still like Apple and BYD although Buffett unloaded a good amount. It doesn't bother me and I am glad it propagates more variant comments for me to work through. I think everyone has his/her own good approach to investing. People chart their paths in their own unique ways of which they feel most natural about.

I'm kind of at this stage. Been investing MI style for more than 25 years, and I think I've done well. But it's been frustrating lately. My returns have been barely above zero cumulatively for the last three years, and in the last 12 months I've trailed the S&P index about 23% to 31%. So while it's fun to manage a portfolio and buy individual stocks, I've been asking myself why continue to bother with it. I'd be much better off in SPY.

Elan

I appreciate your honesty. Now, I have another honest question for you. Over, the 25 years, have you beaten SPY, and by how much? I think every style of investing goes out of style for a while.

I am just reading this off my broker's statement. My 5-year return as of Aug 31 was 11.58% over my benchmark of S&P 500 index. It had been a bull market after all, but I beat the index by a decent margin looking back to any period (which is > 25 years).

It's nice to see someone can beat the market substantially. If I can beat it by 1.5%, I am happy. You are in a rare class of investors.

I am just reading this off my broker's statement. My 5-year return as of Aug 31 was 11.58% over my benchmark of S&P 500 index. It had been a bull market after all, but I beat the index by a decent margin looking back to any period (which is > 25 years).

Oh. That is a per annum compound return of 27.5%/year in the last 5 years. Not anywhere close to Saul. I don't have such risk appetite.

My perspective is working on the financial numbers can only carry one so far. Confirming the sustainability of an exceptional business ecosystem is most significant.

I'm with Rayvt on not having a cash bucket, unless you have some definite rules on when to use the cash and when to replenish.

Yes, I can see both sides of the cash bucket argument. You should do whatever works for you.

FWIW, my cash portion portion is largely in Schwab US Treasuries (SNSXX), currently yielding 4.9%, so it's beating inflation. I get interest from this every month, which helps pay for my living expenses. It's like a high yield money market fund where there is no risk to principal.

This is why I said "cash equivalent", not pure cash earning zero percent.

https://www.schwabassetmanagement.com/products/sns...

Perhaps you take from the cash bucket if the monthly return is negative? If the monthly return is negative, perhaps you take from the stock portfolio because you think the trend is going to continue??

Wealth managers (and a whole host of Utubers) are promulgating their skill at tax management - it depends whether the accounts are taxable / brokerage or retirement, and then of course there's Roth conversions up to the middle tax band (something like $220K income joint) - if one happens to have so much available in traditional IRAs that the tax hit from MRDs is actually a concern. (Not one of mine).

I've not used traditional MI screens for several years now because I watch the Small Cap asset relative and absolute momentum, and although small caps in general have done pretty well the last 5 years (except 22 like everything), my observation is many of the individual stocks in a majority of the screens

When the VL and RSIBD-family screens were working well in 98-2000, they were all picking the same stocks, and guess what they were back then: megacap tech.

Saul's explosive performance in 2018-21 was driven by his extremely prescient & savvy choice of mid-cap SAAS tech. Which trend has ended.

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