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June 17, 2010


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I agree that regular adjustments are essential in one's investment portfolio however I do not believe in adjustments that are based upon a pre-calculated table based upon one's age and upon past performance.

I started funding my 401K in 1960. For many years I had no control whatsoever over what it was invested in. My company had picked a solid, long established custodian that made all of the decisions, and the returns were in line with the general stockmarket returns. Towards the end of my career they did allow us to have some control over the allocation between bonds, stocks, and moneymarket, but changes were only allowed to be made twice/year. I always invested the maximum possible amount allowed into my 401K and there was also a generous company match. Thus after a 32 year career, upon retirement at age 58, in September 1992 my 401K was worth $252,935 and I had another $42,000 in a taxable portfolio.
It took until December 1992 to finally get the 401K rolled over into a self directed IRA at Fidelity Investments. I had also become disenchanted with dealing with stockbrokers so I also moved my taxable account and other small accounts I had at Vanguard and Twentieth Century Investments to Fidelity. A decision I have never regretted.
With almost $300K to manage in 1992 I started using my mathematical skills, engineering experience, and years of developing computer software to turn my attention away from analyzing missiles and nuclear warheads into understanding the technical analysis of market behavior. In 1992 very few investors had home computers and the Internet was in its infancy which gave investors that had comprehensive market data, updated daily, and sophisticated mutual fund ranking tools and market timing software a big advantage over the masses. I didn't know it at the time but I was in a unique position being able to take control of all of my investments just as the Internet was becoming available and that a huge stockmarket bubble was soon to start because of it, and above all I had the daily updated mutual fund data and all the necessary tools to be able to outperform the majority of investors.
Over the next 7+ years I was able to outperform the NYSE composite index by a factor of 3 and my $300K had turned into $3.36M by the time the bubble burst and I was safely on the sidelines.
With that jumpstart I became much more conservative but still used equity mutual funds up until October 2007 when I decided to become a fixed income investor from then on. From March 2000 until the present I have only had an annual compound rate of return of 6.35% but the NYSE composite index has managed only a 0.94% annual compound rate of return.
Bottom line - mutual fund selection and market timing have worked well for me but I am the first to admit that I must have been born under a lucky star to have my aerospace career during an exciting and prosperous time for the missile and space company for which I worked, and to have retired with the right knowledge and experience soon after the birth of the internet, and to have been able to manage my investments myself during the ensuing once in a lifetime market bubble.

I think we are in for a long correction in the equities market. Bonds may offer some haven but only if held to maturity and if you don't lose out by default. To the planner who expects a return of 5% above inflation, good luck with that. Well maybe it would work when inflation is running at -4%.


"Adding stocks to your portfolio will boost your average return. If bonds earn on average 3% over inflation, stocks earn 6.5% over inflation (11% if inflation is 4.5%). Adding stocks provides an engine of appreciation over 30 years of retirement."

I couldn't agree more. The quote above from the article is wishful dreaming and is typical of people that make their living by investing other people's money. It is all based upon the future playing out like the past. Thirty years ago we didn't have the gigantic national debt that we have today. It was $0.9 trillion in 1980 and it's $13 trillion today and out of control.

Vanguard's S&P 500 fund (VFINX) with dividends reinvested, is very popular for people that don't want to practice fund selection or market timing. From 3/21/2000 to 6/17/2010 a period of over 10 years its annual rate of return has been -1.1%, i.e. a $10,000 investment is now worth $8,930 after more than 10 years, assuming that you are not paying any advisory fees.

This type of long term investing approach is totally dependent upon when you get in and when you get out. It also depends upon your ability to continue to hold it through the worst periods. For example, if you had invested $10,000 in VFINX on 10/9/2007, by 3/9/2009 it would only be worth $4,474.

Just think about how you would feel on that particular day. It takes a lot of intestinal fortitude to see your retirement dreams go up in smoke after being invested for less than 18 months. A lot of people would just throw in the towel at the worst possible time.

I never have liked roller coasters! I would rather be in control of my own future, not trust it to someone else.

Old Limey,

I would love to have a chance to learn and play with the software you spent all these years writing. That is really something.


The software I took 2 years of my retirement writing is now on life support and dying a slow death. It runs on the 20 year old MS-DOS operating system and because Bill Gates couldn't be expected to forsee the way PCs would change he constructed MS-DOS with a very limited maximum conventional memory capability of 640K bytes which at the time he thought would be sufficient. Nowdays of course, the Windows O/S uses virtual memory which greatly expands the available memory. I never learned how to program in Windows because I was retired by the time it came out and after discussing it with other developers I realized it would have taken another precious year of my retirement and much stress and frustration to try to get up to speed in it when working completely alone at home without any support. Every market day the software needs more memory because of the added data and also the number of funds and indexes in the database also keeps increasing, thus one by one modules stop working. Fortunately the software that comes with the database uses Windows and does most of what I need. The good thing is that I have been out of equities since 2007, no longer trading, and do not depend upon my own software which I took off the market in 2008. Retirement is great.

Old Limey,

Hmm, so you need a program that can handle a larger database? Like Sequel Server or MS Access?

Very call that the system on MS-DOS carried you all the way through the boom years of the 90's and then thereafter.

I just turned 37 yesterday- my new inspiration is to do the Western states 100 mile run within the next 3 years. Once the buyers complete the purchase of the company I'm running I should get a few hundred K as part of the deal. I'm thinking about taking a little time off and training for shorter races (50k, 50 miler, to get up to running the WS 100). Running that race would be a lifetime achievement.


A belated happy birthday! I would love to be 37 again. A colleague of mine dropped an adventure catalog on my desk when I was 45 and this is what it started - trips that I'm glad I did back in the days when I had the strength and stamina to do them. The window for some adventures like these only stays open for a while.

1980 - A 4 week trek in Peru - Around the Ausangate range, trail to Machu Picchu, by small boat on Amazon tributary to a Machinguenga indian village - back to Cuzco. Age 46.
1981 - A 5 week trek in Nepal from Lukla - Everest base camp - Kala Pattar - Khumbu Glacier - climb of Mt. Mera 21,246 ft. - back to Lukla.
1982 - Climb the Volcanos - Mt. Baker, Mt. Rainier, Mt. Shasta, Glacier Peak.
1984 - A 5 week trek over the Cho La pass and around the Annapurna range in Nepal
1985 - A 3 week trek to Dhaulgiri & the Annapurna villages in Nepal with my wife.
1986 - Hiking the Sacred Peaks in China with my wife.
1987 - A solo backpack trip of the John Muir trail in 14 days. It's 211 miles through complete wilderness in the Sierra Nevada. I started at the foot of Mt. Whitney & went up and over that & 8 other high passes, before being picked up in Yosemite valley by my wife and daughter. It's a great way to lose some weight and do some serious thinking about your life.
1989 - African safaris in Kenya, Zimbabwe, Botswana, Victoria Falls, and a small plane visit to some Kalahari bushmen with my wife.

Old Limey,

That is great that your wife hikes with you. My wife can be coaxed out for a walk but after 3 miles she is not a happy person- so most of the outdoor events I do solo or with other friends, she is great in other ways though :-)

The solo backpacking trip you did in 1987 sounds like the most interesting and fun, it must have been hard to carry that much food.

The first big climb I did was Mount Shasta in 2001 and I was hooked. I saw the mountain from the plane when landing in Sacramento even though it was so far away. I'd done some lesser hiking but never anything the scale of Shasta, I actually drove up to Mt. Shasta city and slept in car up at the old ski lodge area, just above Bunny flats (7800'). It was very cold in the night as I slept in the car to try to acclimatize to altitude and the airplane blanket I had was barely enough to keep me warm. Wore my gloves and coat and did manage to get some sleep... well I tried to hike up, got off trail and lost (but still continued upward) and ended up on a very steep scree and ice slope at 10,200' and slid a bit and abraded my shins. Plus had a horrible headache and nausea from the altitude. I downclimbed back to the car but was motivated by how tough it was. Next year in 2002 I came back with my sister, started from Bunny flats and camped and Lake Helen. My sister stayed at camp but I summited the next day- had crampons and an ice axe at that point.

Since then I've been up Longs Peak, Pikes Peak, Mt. Whitney (3 times), Mt. Muir, Whites Mtn peak, Mt. Langley, Split Mountain, Mauna Kea, Agung Mtn in Bali, Kota Kinabalu in Eastern Malaysia, Mt. Fuji and Kilimanjaro. Plan to go up Mt. Cook in New Zealand if all goes well this year.

You still hike these days Old Limey?


We're kindred spirits even though at 76 I'm more than twice your age. My wife was a good hiker until she started getting arthritis and now, after two hip replacements, and some arthritis in one foot she walks very slowly. Our vacations now are still great but much less active. This year we're taking a repeat of a river cruise from Basel, Switzerland to Anywerp, Belgium, down the Rhine and Moselle rivers. It will involve some walking but nothing that she cannot do. In medieval times the population lived near the rivers because of transportation needs and now they offer some of the prettiest old villages to be found. The ship also has a lovely lounge and a wonderful restaurant so it's a home away from home. Next year we are going from Bucharest to Budapest, a river cruise called Eastern Europe to the Black Sea, and we will also have a 4 day extension in Transylvania and visit Dracula's castle.
The backpack trip on the John Muir trail started with a 50lb pack but as it lightened every day and as I got stronger my mileage kept increasing - dehydrated food never tasted better. Now I hike every Monday with a senior group. A bus takes us all over the Bay Area between Monterey in the South and San Francisco & Marin in the North and between 8am & 4pm, our sub-group called "The Rabbits" usually get a 12 mile hike.
On Mt. Shasta I also camped at snow covered Lake Helen and set off at first light with crampons and ice axe to the summit. To get down I slid most of the way on my behind using my ice axe as a rudder.
We fell in love with Bali and had 5 wonderful vacations there, also going to Mt. Agung. We love the Gamelan, Balinese dancing, and their Hindu ceremonies. Thailand is another favorite and we have had 3 vacations there. On our African trip I had hoped to precede my wife, fly to Tanzania and climb Kilimanjaro but it never materialized because in the end I didn't want my wife to have to travel to Africa on her own. Pike's Peak is a drive up, they have an annual auto race to the top. I remember when I drove up there in '59 our '55 Chevy barely made it - carburetors in those days produced too rich a mixture at those altitudes.
I will ask FMF to send you my e-mail address since this type of conversation is way off topic.

Old Limey,

I will write to FMF separately. Thanks for your note.


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