Everyone Says "Buy And Hold For The Long Term", but then what?

[JBinKC]

During the asset building phase.

Buy and hold forever is absolutely a stupid thing to believe. Brokerage recommendations and the analyst system I believe is structured to deceive clients for the benefit of the entity.

My general rule of thumb is to buy cyclical companies (based upon individual catalysts and relative value) when the fed is expanding the balance sheet and look to sell those kind of stocks when they are shrinking it. Always be on the lookout for secular growth companies in a portfolio and if you happen to own a true secular growth stock ideally buy them when they get down to their margin of safety price and always hold them until there is a change in their dominance in their niche.

[corn18]

Buy when you have money, sell when you need it. It really isn't any more complicated than that.

[Like2Plan]

Good question. So much of the financial education materials focuses on the accumulation phase that you don't think too much about what happens when you reach your goal. My guess is a lot of the financial companies like increasing their assets, but not so much the other way (kind of like Mr. Drysdale character in the Beverly Hillbillies ).

If you look at the safe withdrawal rate, it will most likely disavow any feelings about being "rich". It used to be 4% was considered a safe withdrawal rate--if you ran it through the monte carlo simulation, it would yield pretty good results. But, now I see some folks think that 4% might be too optimistic because of the prolonged really low interest rates.

Then, you have to be mindful of your tax strategy and the pot of money from which to draw--such as pretax, taxable, Roth. Obviously everyone's situation is different so one size does not fit all.

Also, you have to take care in the sequence of returns--meaning you probably want to have some amount of money that will not be subject to large declines in the market short term (because you will be living on that money). The idea is to structure your savings so you don't have to draw from savings in stocks in a down market.

I've mostly switched us to index funds (we only own 2 individual stocks and the rest index funds)--which is way easier to manage. I have adjusted the percentage of stocks and bonds over time. We keep a little more in cash now that we are planning to take distributions in the not too distant future.

[LivingAlmostLarge]

I'm boring and bought KO and XOM. You can make money on pretty much anything if you hold it long enough. UNP we bought over 10 years ago and it up close to 300%. Same time frame google and paypal also up 300 and 400%. Inflation probably. I mean UNP?

[Singuy]

The problem is sometimes you buy dividend stocks because you get it from working there. I just want to point out some people not smart tie up more than their job working at ATT and Boeing, etc. Even MSFT AAPL have more than they probably should overexposure. Anyway I just bought my first dividend stocks coke and xom. Sigh they are doing terrible. My kiddos got stock from DH's uncle two shares of AAPL. They have 14 each. We'll see where they end up at 18 but they have nice sizeable accounts right now between college and taxable just boring investing mostly VTI which I switched out for VOO and QQQ

I am not a fan of dividend stocks at all. They are the most risky from a recession because that's their bread and butter, paying out dividend. They are only doing that because whatever they do have saturated the market and there's nothing to grow into. So when a recession hit, there's only one way to go which is down. This is why dividend stocks all got absolutely crushed and still haven't recovered.

[LivingAlmostLarge]

The best deal is to pick a nice growth stock and by the time you retire, it's paying out dividends. Look at Microsoft or Apple. 2% dividend on say 2 million dollars worth of stock is not too shabby, and let's not forget the stock is probably still growing at 6-12% a year which compounds that dividend payout.

You never want to buy and hold a dividend stock like att with a saturated marketshare. Whoever buying dividend stocks in their 20s and 30s are doing it wrong because you are buying the tail end of the growth so any kind of correction lose you principle vs a growth stock in which your cost basis was 20 bucks for Apple so who cares if it dumps 10% at 250.

The problem is sometimes you buy dividend stocks because you get it from working there. I just want to point out some people not smart tie up more than their job working at ATT and Boeing, etc. Even MSFT AAPL have more than they probably should overexposure. Anyway I just bought my first dividend stocks coke and xom. Sigh they are doing terrible. My kiddos got stock from DH's uncle two shares of AAPL. They have 14 each. We'll see where they end up at 18 but they have nice sizeable accounts right now between college and taxable just boring investing mostly VTI which I switched out for VOO and QQQ

[disneysteve]

The best deal is to pick a nice growth stock and by the time you retire, it's paying out dividends.

My cousin, who is now 65 and has been retired for 10 years, started buying Philadelphia Electric stock when he was young. Over the years he accumulated thousands of shares through purchases and dividend reinvestment. Now he gets a very nice check every quarter that helps fund his living expenses. And he is not rich by any means. He never earned a 6-figure salary. But he lived frugally and invested steadily which allowed him to walk away at 55 and have a great lifestyle.

[Singuy]

The best deal is to pick a nice growth stock and by the time you retire, it's paying out dividends. Look at Microsoft or Apple. 2% dividend on say 2 million dollars worth of stock is not too shabby, and let's not forget the stock is probably still growing at 6-12% a year which compounds that dividend payout.

You never want to buy and hold a dividend stock like att with a saturated marketshare. Whoever buying dividend stocks in their 20s and 30s are doing it wrong because you are buying the tail end of the growth so any kind of correction lose you principle vs a growth stock in which your cost basis was 20 bucks for Apple so who cares if it dumps 10% at 250.

[james.hendrickson]

I always figured I'd lock up any excess assets I had in something that might skip generations, or something my kids could access when they were 40 or 50.

[ua_guy]

them blow it on them hookers!

?????

[~bs]

them blow it on them hookers!

[ua_guy]

I would imagine the common reference point is when a retiree begins to draw on investment resources to support expenses. That's what it will be for me, in some form. I imagine a life change of some sort, not necessarily retirement, but I really really want to slow down, live much more simply, and get out of full-time work.

[bjl584]

So, I've been puzzling over this for a while.

Most of the finance literature says "buy and hold" for the long term, but what happens when that “long term” point arrives. Whats that point for you guys? Life change? Retirement?

Probably "life change" for me.

There will be a point when all of the years of amassing and growing a portfolio will be able to sustain me via dividends or rental income.
At that point I will most likely change what I am doing on a daily basis.
Probably not full retirement but maybe shifting to a part time job or doing some form of side work.

I'm still a couple decades from doing that, all things being equal

[kork13]

"Life change" is probably an appropriate way to put it broadly.

Retirement is the most obvious "long term" time frame, which for most savers/investors probably means anything from 10-50+ years from today. Also note that "retirement" isn't a single moment in time, but typically stretches out for 15-30+ years. So even once retired, one must continue to invest for the "long term".

So retirement is certainly one part of how almost everyone will define "long term investing." However, I'd argue that many folks will also invest in "long term" assets for purposes such as kids' college, a planned career transition (ex: military members often "retire" at age 40-50, and transition into a totally new career field), or it could even include purchasing an empty-nester home.

Personally, I define "long term" as any goal that I've set with a time horizon of 15+ years (with 5-15 years as "mid-term," and 0-5 years as "short term"). Those definitions are largely arbitrary, but I organize my savings/investments in those terms as well, which drives HOW that money gets saved/invested. So when the life event that is the purpose of each bucket comes up, I simply reach in & pull out what I need from it. Otherwise, I plan my budget accordingly to contribute regularly to them & meet my short/mid/long term goals.

[disneysteve]

Great question.

For the past several decades, the focus of investment advice has primarily been on the acquisition phase, amassing and growing your portfolio. It has only been in recent years that more and more articles and advice have started coming out about the draw down phase - retirement. As the baby boomer generation has entered retirement in force, that's become a lot more important, especially as traditional pensions have become less and less common and more and more retirees are responsible for their own income generation by tapping their portfolios.

If you read a lot of financial literature, you'll see more and more about how best to generate that retirement income, which assets to tap first, how to be the most tax efficient, when to claim Social Security, etc.

It is a huge change of mindset to go from saving to spending. I can't speak from personal experience since I'm still in the saving phase but I hope to be entering that spending phase in 5 or 6 more years.