No, I didn’t have a lot of accumulated cash, but I did have around 30% of the 401K in bonds and during 2008 normal rebalancing meant I had to sell a lot of bonds and buy stocks to bring me back to a 70/30 ratio. That’s not a hole in my story, that’s just rebalancing. I can explain it to you, but if you don’t understand it already this probably isn’t the right thread.
That plus the $15,500 I could put in, plus my $5,000 a year catch up for being older than 50, plus the company match gave me a chunk of fresh cash to put in at the bottom.
And a lot of retirement accounts offered self directed brokerage accounts even 20 years ago. That’s also something you don’t seem to know.
As far as selling around the peak, I mainly don’t sell at all except to rebalance. I still have the first share of stock I ever bought more thirty years ago. Of course, these days I’m strictly in index funds, but I have a sentimental attachment.
There was a time when I had almost half my 401k in a self-directed account in individual stocks, but as I reached sixty or so I realized that staying on top of 40 individual stocks required a diligence which detracted from the quality of my life without providing a significant enhancement to the return so I spent almost a year choosing exit points and transferring over to index funds.
If you are investing periodically then that is what you are doing. You are staying in when high and buying when high, low, and in the middle. Saying you are buying a bargain when it crashes is correct in retrospect. Noone is saying they have a crystal ball.
What I and a few others are saying is that if you are investing over time and have a long enough horizon you’d be foolish to cash out at a so-called peak. Because guess what? Those who panic and sell don’t have crystal balls either. Historic graphs however are freely available to everyone. They show that the US market over 15 year periods always go up.
When your alternative is a bank account that pays less than inflation why wouldn’t you invest in equities if your debt is low interest and you don’t have enough money to invest in diverse real estate? Now, of course, the past doesn’t predict the future. However, since stock markets reflect value of companies in dollar terms and productivity, innovation, and stability are all high it’s doubtful that the stock market is going to disappear. If it did, your holdings in anything aren’t at the top of your worries.
The positive trend that could be disruptive enough to cause concern is advance AI and robotics.
I will echo what Bill Door says - and his approach.
The one time I tried to anticipate what the market would do, I lost out on 20% growth in what I sold.
The three times I just stayed with my investment mix and monthly investing, I lost lots of money - but it all came back in less than 18 months (1987, 2000-2002 and 2008-2009).
This time around, I will again stay the course. I am living off a stable value fund and will let my stocks and bonds rise and fall with this market.
We were fortunate that we had institutions strong enough to bail out the financial system and a federal government wise enough to implement the New Deal safeguards. We may not be so lucky next time.
Consider that banking accounts were spread among many banks a decade ago. The recession wiped out many of those and a few big banks control a much larger share of assets. Even if a president and congress wanted to, institutions may not be able to bail out the banks - and that’s assuming that this government would even attempt to. I still remember the proto-tea party wing of the GOP voted against bailouts and only did so when it was clear that the financial system was perhaps 24-48 hours from collapsing into oblivion.
It’s not just trade with Canada that will be disrupted; the Trump administration is going to disrupt global trade of all kinds. This is an area where Trump at least reveals some ideological leanings, preferring to take America back to a world that predates global trade agreements. Yes, there was trade in 1972 before NAFTA and WTO, but to dismantle the agreements now would be extremely disruptive and nobody would know the consequences.
Generally, a world that operates on protectionism and nationalism is one that favors competition over cooperation. Living in that kind of world means encourages conflict and force over negotiation. I have no problem with Trump pushing a renegotiation on trade, but negotiation means that each party walks away with something. That’s not what Trump is advocating. He wants his legacy to be one in which America dominates its trading partners.
The Dow Jones “Trump Bump” maxed at almost 27K in Jan. 2018. Since then the Dow has been more or less flat. If one takes a look at the 5-year market trend, it is reasonable to hypothesize that there was an initial surge of enthusiasm based on expectations of lower corporate taxes and less government regulation, but since then the long-term upward trend that preceded Trump has stalled, at least temporarily.
I know quite a few business owners. Most were not fans of Obama during his administration. Not because of what he did, but because of what they believed he might do: they were worried he would raise their taxes and/or enact more burdensome regulations on them. This fear (rational or not) made them apprehensive to take risks and invest in their companies. With Trump, they have much less fear of this occurring (again, rational or not), and are more willing to take risks and invest.
In other words, many business folks are very sensitive to what might happen based on personal perceptions and biases, even when they’re irrational.
The DJIA is down over 1300 points on the year for 2018. What again is the trend we’re trying to extrapolate from this?
Though I’ll concede, the stock market looks seems like it’s really trying to boom, but bumping up against Trump’s boneheaded attempts at governance. Note that the market took a dive in January when Trump started effecting his protectionism agenda.
If we’re going to bet the over-under on the long-term U.S. stock market future, I’ll want to use a constant-dollar measure. Allegedly Trump intends to pack the FRB with loose-money toadies.
And what’s with the preoccupation with the “Dow”? Half that index comes from just nine (9) stocks:
9.4% Boeing
6.8% UnitedHealth
6.3% Goldman Sachs
5.5% 3M
5.4% Apple
5.3% Home Depot
4.2% McDonald’s
3.8% IBM
3.7% Caterpillar
To track gun sales you don’t count invectives at Yahoo Blogs (though the count might strongly correlate); you use stats from the Bureau of Alcohol, Tobacco, Firearms and Explosives. To track stocks why use Boeing and United Health when you can use Stamdard & Poors’ 500-company average?
The same reason people freak out when it approaches big round numbers, stock trading has more in common with trading baseball cards than economics these days.
In the past year, the Dow has gone up from 21,905 to a current 25,246.
Why?
The corporate tax rate has been reduced and some costly regulations have been rolled back. This is the work of the President.
A lower tax rate and less operating costs for regulations mean companies will be paying less in taxes and operating expenses. Companies will be keeping more of their profits and spending less to run the business.
The new tariffs and rising interest rates have some adverse fluctuation on the DOW, but earnings reports appear to be good in general, and the worry over tariffs in time I think will be less than they are now.
This will mean more jobs, and money here, and less reliance on foreign-made goods. I think the USA citizens are for that!
You might see an increased production and earnings on the areas Trump has targeted for tariffs from USA based companies. Take US steel for example. They are up for the year. 22.81 to 32.58. ( A 30% increase ) Impressive. And yes, I predicted this and profited
If you want to play the market, betting on USA companies that make the products Trump is putting tariffs on, I think is a short-term smart play.
In September 2016 Donald Trump claimed that the stock market was already dangerously overvalued (in his words, that it was “in a big, fat, ugly bubble”). What’s changed since then to suddenly make rapid market growth a sound metric for presidential economic success?
Funny. Over the same time period Trump’s market has gone about about the same as Obama’s. It is almost as if Trump inherited Obama’s economy and hasn’t really affected it one way or another (alternatively, that the president really doesn’t have as much influence over the markets as people like to think). But I would love to hear you praise Obama for creating the identical amount of growth over the same period of time, but you won’t will you?
As I commented elsewhere, it is easier when one does not pay what one owns, and Trump is an expert on getting praises while having others pay the bill… Later.
Half that index comes from just nine (9) stocks: