Stock market is at a record high. In my life (im 40) i’ve seen 4 times where stock prices plunged and in hindsight would have been a good time to buy. (1987,1997,2001,2008).
If you suddenly had say $100,000 and no mortgage or major bills to pay,and you were my age, would you think like me that one should wait for it to drop again and buy at that time? Or is my logic flawed by basing my decision on my particular 25 year window?
I didn’t just inherit 100K BTW. It was just one of those “what would I do” thoughts that popped into my head.
I’m certainly no shill for the Dow/NASDAQ people, but I don’t know how you’d ever “time” such a thing just right. If I had $100k fall right into my lap - sure I’d go nuts and spend the first $10k on an extravagant vacation, down payment on a new car, etc (probably stopping short of the proverbial “hookers and blow” :p) - but I wouldn’t hesitate to invest the remainder - at least into some sort of a mutual fund or something.
There are millions of people out there smarter than me (hundreds of thousands of which probably post on this forum), but me being a “buy and hold” guy, I’d hate to just wait and wait and wait, and then kick myself three years down the road, if the market kept going up and up.
And for whatever it’s worth, I barely have a year on you age-wise (year-and-a-half at the most).
No, I’d get it working right away. Blue-chip stocks didn’t lose that much in the so-called crashes and there are other investments for those times. I might readjust during the crash (in fact, I did!) but I wouldn’t just sit around waiting.
I think gold might keep falling through mid February and IF it does, picking it up at a low and then offing it when it approaches all time highs would probably be quite profitable with very little, if any, risk.
There are a lot of variables with any investment but I think the influence on gold is the current market highs that are ongoing probably just in between the last national debt hostage crisis and the next one coming up in March. Until then, I think gold will fall and at some point, reach a fairly low level.
Then when the stock market pulls back again at the next Congressional Tea Party refusal to meet our debt, gold will skyrocket.
After that you would have to watch quite a variety of macro news to reevaluate and some fair high might be a good time to profit take and just bank it.
Whatever you do, I wouldn’t put money into financials. I think that bubble is about to burst. All that uncollectable debt out there, bundled and resold over and over. It’s just a matter of time.
All the data shows that trying to time the market doesn’t work. If you had invested $10,000 in the S&P index on January 1, 1980 and let it ride until December 31st, 2012 you’d have ended up with $332,502. If you had missed the best 5 days in the market you’d have ended up with $215,273. That’s from wallstreetdaily.com
It wouldn’t be a bad time to get into low beta stocks, dividend payers, that sort of thing. There are plenty of companies that not only continued to pay dividends but increased them during the whole 2007-2008 debacle. As long as you don’t have to touch the principle price drops on income producing stock are paper losses.
The best thing to do is to invest part and keep part in reserve. The specific allocation for each will depend on how agressive/conservative and optimistic/pessimistic you are.
I’d recommend dollar-cost averaging into the market. Perhaps you might invest $10,000 each month for the next ten months into a low-cost index fund. I faced the same decision just over a year ago. I had about twice that sum from the 401(k) of my previous employer that I wanted to move to an existing rollover IRA at Vanguard. I chose to put about an equal sum into an index fund each month (moving it from a money market fund in which the money was parked), over the course of a year. Unfortunately, because of the runup in the market during 2013, I would have been better off had I just transferred all of it to the index fund at once.
What do you mean specifically about “financials”? Are you talking about investing in banking specifically or stocks in general. I’m not terribly knowledgeable on this subject.
I had a stock account back in 1999-2001 and did quite well. Cashed out when I quit my job and needed money to live on.
Having finally gotten a high paying job again, one of the things I had been waiting to do was to set back up another stock account. I managed to set it up last Friday with a measly $100 and will be putting $1k in it tomorrow, and another $1k in it in a couple of weeks, at which point I will be able to start accumulating stocks.
The thing back in 2000/1 was that there were always bargains out there. I regularly found undervalued stocks and made 40-70% on them in only a couple of months. Right now I’ve been doing a fair amount of research and I’m not finding that to be the case. The market went up significantly last year, and there’s really two possibilities;
1> The market has made it’s gains and will level out or trend downward for a while as people cash out their gains.
2> The market made up for the last 10 years of stagnant economy and will bounce around in the current range (plus or minus a bit) before moving on once more information comes in. If the economy continues to build up steam, it will rise.
However, as I said, right now I’m not seeing bargains. The P/E ratios of companies is generally way too high compared to historical averages. Now it could be that all their earnings are low and will rise, but that seems rather unlikely.
I look at the various analyst buy/sell ratings with a huge grain of salt. I’m looking at a good number of companies whose stock prices gained 50-60% last year, their P/E’s are around 30, and they’re being recommended as a Buy??? No no no no no.
I have a couple of Buy and Hold stocks in mind where I don’t expect the kinds of gains I once made, but rather, am looking longer term accumulation, toward my retirement in 15-20 years. But speculation for gains? Not looking real great at the moment. But then again, this time around I haven’t been spending the months and years looking for them like I had been last time. I expect I’ll get there eventually.
No, money depreciates in value if it’s simply kept hanging around. Nor is a bear market the only good time to invest. If you suddenly had 100,000 dollars, spend a couple thousand on a financial adviser.
I don’t want to be the guy that says $100,000 to invest is peanuts, but it’s not much money if you’re out there buying individual stocks. Index funds would probably be the way to go with 100 K. I’ve got slightly over half of my 401k in a self directed stock fund, doing well enough that I’m beating the professionals over in the managed account. They won’t let me move any more funds over to the SDA as long as it’s more than 50% of the total, so I’m kind of stuck where I am, unless those guys running the managed account start to make some money.
Remember, the 2013 outlook was also for a pause, the S&P index had gone up almost 60% in the last 4 years.
Problem is that you don’t know, except in hindsight, when would have been a good time to buy.
Take the 2008-2009 crash for example. On the descent to the minimum in early March 2009, there were a number of spots where the market started to rise again before resuming its downward plunge. at any given point, you don’t know whether the crash is almost over, or whether it’s just begun (note that before the Great Depression in the early 1900’s, the market lost 90% of its value, so any expectation that “this has to be near the bottom, it’s got to turn around soon” has no historical justification). Let us imagine you came into $100K in October 2007. As you look at the stock market from fall 2007 to summer2009 (when the market recovery began in earnest), when would you have decided it was time to put your money in? May 2008? August 2008? March 2009 (what if this was actually 1930???) Try covering up all the information to the right of whatever date is currently under consideration, and then making a decision.
It’s flawed based on any conceivable time horizon. If you’ve got a very long time horizon, then a crash in the near term means very little, so you might as well invest now. If you’ve got a short time horizon, then you could be sacrificing potentially valuable earning years by waiting for the next crash.
You can play with this in a spreadsheet:
-pick any 25-year period in the last 100 years.
-Watch the S&P500 index, and see how long you would have to wait for a crash (one that meets your definition of a crash).
-Calculate two net values: one as if you had invested $100K at the start of your 25-year period, and another as if you had waited for a crash before investing. See which strategy wins, and record the results.
Now pick another 25-year period (it’s OK if there’s some overlap with your previous test period), and do the math again. Repeat a few dozen times
How often does the “wait for a crash” strategy produce a bigger return? I’m gonna guess that once in a while it works, but that most of the time it results in a lesser return.
I would also get it working right away. If you want to wait for a market crash, you may miss out on some of the gain that comes during the build-up. And, how do you when the crash is over? Even in the current market, there are a remarkable number of people who are STILL convinced there will be a double-dip recession and they’re STILL waiting for the “right time” to get back into the market. Just get in. Even if there is a double-dip, you’re still better in than out, on average.
This is especially true since you’ve got 40 years before you need your money. What’s a short-term 10% gain if you time the market perfectly, when viewed through the lens of 300% overall gain in that period? (And, yes, if you’re 40, plan on having 40 more years in the market - at least. Don’t tell yourself that you’ll only live 35 years because that 1) wrong according to actuarial tables and 2) doesn’t give you much of a plan B if you do survive.)
However, do make sure you’re thinking in terms of diversified assets. You want a mix of asset types and classes - stocks and bonds, real estate, etc. Buy into the allocation of assets that has the right risk/performance profile for your needs and ignore market timing.
Actually a good place to invest which is often overlooked is the debt collection industry. They are booming and likely to keep doing so, but that would make it an expensive buy in, you’d have to watch the market for lows to pick anything up.
Im probably sending this thread way off topic, but is this still going on? As i’ve said before i’m not very knowledgeable on this subject. I know the broad outline of what happened in 2008 from a PBS Frontline documentary about the financial collapse. When you mentioned bundled debt resold over and over are you saying nothing has changed? It’s the same game as 5 years ago?
My wife started a job at a major computer company a little over a year ago.
She had an opportunity to buy some stock. Because the company wasn’t doing too well, the stock price was only around 20. She reasoned that the price might continue to fall so she decided not to buy any stock. Soon the price jumped to 40. At this point she thought that that since the price had doubled, it wouldn’t be a good time to buy.
Last time she checked the price was 80. Now she says the price is really too high and she doesn’t want to buy any.
Don’t try to time the market.
Put a comfortable amount of money into a index fund like Vanguard Total Stock every month regardless of where the market goes.
There may be a very few people who are successful at timing the market, but … if you have to ask…
However, when “proving” the S&P 500 outperformed over any 25-year period PLEASE make sure you’re comparing stocks with, e.g. a portfolio of investment-quality medium-term bonds. (All too often, such comparisons are with cash kept under a mattress ! :smack: )
Interesting how often that, after paying lip-service to “can’t time the market”, someone will discuss how to time a given market.
Yes, incremental moves both in and out is a good way to limit “timing risk.”
Putting $10,000 into each of ten stocks might be thin, but individual stocks have several advantages over funds, at least for some smart confident people. Good stock pickers might not be uncommon. A friend had Harley-Davidson and Philip Morris at the top of his recommendation list in the early 1990’s – I’d be farting in silk if I’d put all my money into these two stocks! (MO was especially sweet; you could buy more at a low price whenever some lung-cancer widow got a half-billion dollar jury award!) If you avoid risk by limiting exposure in any one stock to 10% you’d need ten great picks, not two, to get great performance. My friend’s reply to that: “Diversification is de-worsification.”
Disclaimer: This is neither an offer nor a solicitation. Anyone who thinks of following my advice should set aside $3000 for psychiatric consultation.
Well, I wouldn’t say I’m an expert so if you want expert advice you might take the very good advice of some prior poster and hire a financial advisor.
However, I do have some interest in the market and can only speak for myself.
Ok, so the housing bubble and some hedge funds burst in 2008, which I knew was coming from early 2007 on and predicted (in print). I like to think I’m pretty good at this.
The way we what some might say, got on our feet, was by sabotaging the interest rate with regards to keeping it pathetically low and it’s too long to go into it about why that is useful to the investor class and a disservice to the working class because it’s too complicated.
The Fed simultaneously did some billions of bail out which you might recall that enraged any number of working class since it only bailed out the truly elite from failing at risk-taking.
In the midst of all this if you google college loans and payback rates or credit cards and bankruptcies, or even how many more house and small business loans are going to fail over this next year and probably ongoing for a decade, what you might see is that we are in the midst of a series of massive bubbles.
Any or all of these bubbles might burst at any time. Or course there are a lot of variables to they also might not.
It might be of interest to you that many multi-millionaires are currently selling off most of their stock in big banks at this time. It caught my attention, anyway.
Now Congress did kind of a bubble trick on college loans that again is too complex and lengthy to explain in depth, but I’ll sum up loosely with Congress enacted legislation that allowed people to borrow money through federally sponsored college loans at “online universities” and so forth in a huge glut. Since many of those places aren’t really valued, right or wrong, it means these people borrowing federal money in the tens of thousands for a worthless education or one which will not end in good employment in any event, will never pay all this back.
This debt almost pushed on to the unaware is the new housing bubble. It can’t last. That’s not even an opinion. It’s a fact. So all this debt is bundled into derivatives, sold and resold and resold on the global market and it’s a hot potato. It’s essentially uncollectable debt, meaning anyone holding those bundles is subject to financial ruin at any time some entity calls it quits, as Germany did in 2008.
I’ll see if I can find an excellent econ video that explains it in layman’s terms.
What I’m saying is that we just replaced some bubbles with some other bubbles, blew worthless hot air into the ones that melted down, the market is vastly overpriced for the most part. It’s all going to blow up, melt down or however one may wish to view it, fairly soon without incredible intervention. And when it does, none of it will do anyone outside the top 2% any good, because “money” and “wealth” are being created only with illusions and gouging the American consumer with hideous prices on things like health care which are also unsustainable. Dunno if you knew but the majority of bankruptcies are caused by one illness. The high cost of medical care in the U.S. means that any American who isn’t a multi-millionaire can be wiped out at any time just from the costs of any unexpected illness.
Even worse, the stress created by living on a tight wire economically in a country in which wages are only about half the cost of living means that people are simultaneously getting sicker faster. Poverty, relative poverty and stress can all make people literally physically ill, hence adding fuel to the fire of people being financially endangered right and left with no ability to rectify the situation.
The illusion that is our path to prosperity or safety or whatever you want to call it is an illusion, safety is nonexistent and everything is getting worse and will continue to unless or until there is some dramatic change.
Now the thing about the market is that one can make money going up, coming down (short selling) or in a wide variety of ways, but I can almost promise you that none of that is going to be enough when you are paying 4k a month in rent, 3k a month in health insurance premiums, 20$ a gallon for gas or milk or all this other inflation, even if you win a bit in the market. Now all that inflation is, in fact, what is being termed “growth” and making the rich richer at everyone else’s expense. And our government is so corrupt that this is unstoppable at this point.
Summed: the powers that be call increasing inflation growth and increases wages inflation, which is the dead opposite of economic truth. And they do this because the American population is dismally and deliberately ignorant of understanding macroeconomics.
We’re all doomed. Prepare to live in a third world country which is what we are becoming, because each burst bubble booming on the way down will drop us in clumps of loss further and further away from first world standards. At least they are fighting it in Europe. Here in the U.S. we are kicking our neighbors down the ladder as fast as we can pretending we don’t know that we’re next. Bizarre.
