Never mind is right. Imagine you were retiring this year, you started your retirement savings in the 1970’s. The S&P 500 was around 90 in 1970, down around 75 in 1975, and up at 110 going into the 1980’s. At the time, you might have felt terrible after five years of investing being down almost 20% and been tempted to just give up. The reason it’s a bad idea is not the fact that it ended up hitting 120 in 1980, it’s the fact that it’s 1100 right now.
The same thing will be true in 30 years – you won’t care that you bought some of your stock when the S&P was 1500, so long as you wait to sell it when it’s at 15,000.
I’m in the 20-25yrs until retirement range. I used to jokingly telling my 60yr old co-worker that what we need is a good 5 years stock market slump. I don’t tell him that any more, but I am buying more stock these days.
I must be the only doomer here. I’ve never been seriously into stocks. I invested in real estate when I had extra and it gives me monthly income today and as far as I can see into the future.
I’ve spent years and years building up tools, possessions and food, fuel stocks to weather most any blow.
I keep a good 20-25% of my “retirement” in cash and precious metals and the rest in money market checking accounts spread between three different local banks and credit unions, returning a paltry 1 to 1.5% these days.
Don’t ever really plan to retire though. No real need as long as I still have my mental facilities, can sit up in bed and have access to the phone.
I don’t trust any of the goings on in the financial markets and never have.
I’m not as much into stocks as I would like. My 401(k) (which is not as well-funded as I would like, but I’m taking care of other financial matters first as this is my first real job out of school and none of the employer-match has vested) is a pretty aggressive mutual fund put together by Mass Mutual and targeted for a date of 2050. My IRA is also more conservative than it should be, but it’s another single fund. It’s an asset-allocation fund managed by USAA that also gets into metals and commodities. It’s done pretty well since I started it a few years ago and pulled out of the recession pretty nicely. I need to start putting more money into a pure stock mix, but what I’m holding right now is up 26% over the last twelve months, so I’m not complaining.
I’m behind where I should ideally be, but three years of grad school will hopefully pay off better in the long run. Besides, I’m still on the happy side of 30 and can’t touch those accounts without penalty for 35+ years, so I’m not too worried now as long as I start getting closer to maxing out contributions in the next few years. (I’m ignoring a potential loan from the 401(k) to buy a house.) I’ve pretty much given up buying individual stocks after a flirtation in college. I might buy some here and there in the future, but I’d rather have a couple large holdings in mutuals and indexes than trying to juggle a bunch of securities myself.
I like most of those choices, but I personally would avoid pharma, especially big pharma, and most especially Pfizer. (I realize you probably bought Wyeth before the acquisition was announced.) I’m in the pharma sector and the big boys are all having issues with their pipelines and are coming up on patent expiration on the blockbusters they’ve gotten out. If you want to be in the sector, I’d seriously consider CROs in both the US and overseas. (Disclosure: I work for a CRO though I currently do not own any company stock.) There seems to be a consensus in the sector that big pharma is likely to go the route of more mergers, more acquisitions of small companies with a promising target, and more outsourcing.
You might be interested in Vanguard’s Mid-Cap Weird Survivalist Loner Short Term Growth Fund. It invests heavily mostly in canned goods and shotgun shells.
Seriously though, disaster preparation is not an investment strategy.
Also, I didn’t understand the OP’s choices. I invest long term in companies I think are positioned to do well and my stock portfolio is currently up about 20%.
I wish you (or someone else) would tell me what you don’t understand about the OP—and I hope that doesn’t come across as snarky. Apparently you aren’t the only one who doesn’t understand my choices.
Here’s the best explanation I can give. I was curious to see where dopers felt the economy was headed. My assumption is that the health of the stock market is related to the health of the economy.
So I tried to combine three polls into one. The first section (Stocks) was to see where you thought the broader indices were heading. The second section (The Economy) was to see where you thought the economy was heading. The third section (Stock ownership) was to see how vested you were in your answers. Ideally everyone taking the poll should have three and only three responses.
How would you have phrased the question? What is unclear? Or do you think that the information polled is mostly meaningless and uninteresting?
Is it a safe assumption that most people will be able to participate for 30 years? At least for me, the first part of my career was paying off necessary debt. I had to pay off student loans, had to buy a car, a house, professional clothes, etc. At best I could have had 20 years of investing.
What concerns me about the S&P 500 graph is that aside from 1974, all the local minima were trending upward until the 2000s. The 2002 and 2009 minima were practically the same. I assume the 1974 drop was due to the oil embargo. Sure the graph of the S&P500 looks mostly good, but the Dow has plenty of sections where return isn’t as brilliant.
I know no one wants to give me a lesson on the market here, but what happened in 1994? Is that when dividend taxation changed and companies quit paying decent dividends saying the investor value would be gained by growing the company, therefore growing the stock price?
Like bare I’ve grown distrustful of the financial markets. I do believe that a professional can make money investing. I’m not convinced that a casual investor like myself can except through luck. There’s too much information to digest. The creative accounting, changing tax laws, and plain dishonesty make me leary of the market. On a purely intuitive basis, I can’t absorb the idea that the value of something fluctuates so much DAILY. The S&P500 was, I believe, down 2% Wednesday, up a bit more than 2% Thursday, down 2.8% Friday. Can you imagine how crazy life would be if local retail behaved like that? You could buy a widget today for $100, return it to the store for $80 the next day, then see it selling for $120 the very next.
I do that, do some dividend investing, and churn for some short term gains. I’m not above taking an opportunistic stake in a company because its competitor had a bad quarter and the whole sector goes down for two days - day trading - but very small scale - maybe $1000 at risk at a time - and sometimes I get hosed. I have money in bonds, in international funds, in index funds. The kids 529s are invested conservatively because they are within ten years of college. Our 401ks and IRAs have a little more risk, because we are twenty years from retirement. But I have “gambling” money as well. We also have a options and grants through work that I try and diversify out as they vest - eggs in one basket.
My gambling money however, isn’t needed. When I forgo something - like skipping a $150 cut and color for a box of Loreal and a trip through CostCutters…I put that money into the play fund. So that account is “hobby money.”
About three years ago, I told the people who manage my portfolio to keep entirely out of US stocks. Also Chinese. As for the US, my reason was that with the giant and blossoming debt, I thought the US dollar had to go down. And it has. For China, I just don’t like investing in a country with no effective rule of law and I still don’t.
So during the past couple years, my portfolio dropped a few per cent and is now (barely) above water. I have a friend who claims I invested badly and was lucky. He feels he invested well and, having been substantially leveraged (he borrowed a fair amount of money to invest) he is down at least 50%, but he ascribes that to bad luck.
I am a Certified Financial Planner and have worked, both on an academic and a personal planning level my whole life. What strikes me about most answers is the conviction that they know to some degree or another what is going to happen in the future. I long since gave up that notion. As I look for investors who have consistently correctly predicted future market movements I am left with maybe a handful of people, and I doubt even those.
In a way that makes individual investment decisions much easier. If you are willing to accept that any movements you make in response to short term market direction are likely to be wrong, you are free to see a different way to manage your money. If you want to be successful all you need to do is:
Invest at as low a cost as possible
Create a portfolio that is efficiently divided not just between stocks and bonds, but between the right types of stocks, bonds, real estate and commodities.
Systematically and emotionlessly rebalance back to your target allocation as the market moves up and down. This systematizes selling high and buying low.
Take a level of risk that will give you the highest probability of success over the time period you are facing. For younger people this is usually heavily (75-80%) in stocks. For a retiree it may be 20-30%.
Science has intruded in some many places, but investing is one area where people routinely ignore evidence of what actually works and go ahead and rely on hunches and anectdotal evidence. The entire marketing department of most advisory houses and mutual fund companies is built on misleading statistics and returns. Almost everyone here would be better served by putting their money in a Vanguard Target Date fund based on when they plan to retire than by investing via the wild ass guess method.
I guess I’m not sure what you mean when you are saying “long term” and “short term”. Are you asking us where we think the market is heading? And how long is “long term”? 1 year? 20 years?
The “Economy” and “Stock Ownership” sections I get.
Also, I don’t understand what people mean they “don’t trust the markets”. Don’t trust them to do what? Provide you with an automatic return? Exist next year? Of course there is an element of risk.
I would agree that maybe the casual investor shouldn’t be investing in stuff they don’t understand. Before the mid 90s, the general public never really invested in stocks the way we do today. The the internet and E*trade made it possible for every jerk to create an online brokerage account and start day trading. Add to that the Dot com bubble so now everyone and their brother thinks they can get rich overnight.
It’s not a given for everybody, but ideally you would start funding your 401(k) at least 30 years before retirement. The trick is not to put your retirement savings after everything else (e.g. student loans, car, house, etc.) Because of compound interest, the money you put in the 30-40 years out will grow so much more than later contributions that it’s really in your interest (ha, I make joke!) to start as soon as possible. The best way is to set up automatic withdrawals as soon as you start your first real job, so that money is gone before you ever see it. (Mrs. Giraffe got me onto this. Despite my initial resistance, I quickly readjusted to my new lower salary and simply spent less on other things.)
:dubious: I think you mean $98 and $102, yes?
But I get what you mean – the stock market has been crazy volatile this past year or two, and it is not a place for the casual investor who isn’t willing to lose some or all of their investment. That said, long term investing is a different animal than trading, and I think it’s a mistake to let recent craziness and uncertainty sour people on what has historically been a very profitable way for regular people to significantly augment their retirement savings.
This has been an exciting year for hobby investing – I lost my whole hobby wad trying to catch the falling knife of financials back in January. I still think it was a good bet, though – I bought some FAS (3x leveraged financial fund) at around $8 when people were talking about the banking system collapsing completely. I thought we were done panicking, but there was one last freak out which sent FAS down to $2.75 (I got stopped out at $4). I thought that if that didn’t happen, i.e. I’d gotten within a factor of two of the bottom, it would surge back in the coming months/year and I was right – it’s been around $80-$90 for most of the fall, which would have been a nice 900% gain.
But that wasn’t investing, that was just gambling for fun.
Sorry, but I think you bought into some BS here. I’m not sure what most people do, but smart people start investing as soon as they can; in their 30s if not before. Unless you’re a ditchdigger, you can buy a functional car for a few months’ salary every five years (and if you are, you don’t have any school loans). You can buy “professional clothes” at Walmart (I do, for my median-income office job). If you bought a house, that is a good investment, unless you buy more house than you can really afford and don’t plan on having it paid off at retirement.
It doesn’t take a radical lifestyle change to start putting 5% into an investment account when you’re 35. It just takes a willingness to give up on a few treats.
I’m not meaning to sound callous here, but it sounds as if you 1) waited to long to start thinking about the future and 2) invested overly aggressively, keeping things in stocks even when you were getting close to retirement.
The weird thing is that while I know its gambling, I don’t gamble for fun. I buy stocks the way I know other women by jewelry or purses or shoes. I collect them.
Years ago my brother in law was dating a girl who was wearing a pretty bracelet or something and I gave her a complement. She said “we should go shopping together” - I said that while I loved her bracelet, it wasn’t something I’d go shopping for. “Well, what do you shop for.” I thought about it for about three seconds…“Stocks.”
Some women have a closet of shoes, and occasionally they go through and give them away to Goodwill. I have a portfolio of stocks - that if I get bored of one of them I trade off for something shinier. And six pairs of shoes and three purses and my jewelry fits in a pretty small box.
I purposely left the definitions ambiguous. I reasoned that the more I tried to lock down terminology about a subject of which I know little, the more pedantic the discussion would wax. In my mind less than 5 years is short term, 5 to 15 years is mid term, and long term is greater than 20 years. I suppose 15 to 20 years is longish.
“don’t trust the markets” means to me that I don’t trust that I have the ability to make an informed decision nor the ability to acquire the information to make an informed decision. No amount of research is going to make me an insider. I do believe that the “movers and shakers” have great ability but they had considerable luck too. I feel like I am playing a card game where I vaguely know the rules. It’s sort of like Whist, OK? —More like Bridge. But unlike Bridge where you can be assured of the rules, in this game the top players change the rules, buy influence with board that governs the rules, and are not above out-n-out cheating.
I would agree that one needs to invest as early as possible. I disagree that one should invest while one is carrying substantial debt load (other than a house). That debt is compounding too, and it’s compounding against you, and at a guaranteed rate.
I almost didn’t write that. I meant it as hyperbole.
I think that you and Giraffe are working under the assumptions that most people find their career right after finishing college. For those of you who were smart enough (or lucky enough) to have found the career that you like early, sure, you’re advice fits perfectly. However, there are those like me who didn’t find a good fit for years later —27 for me. And there are those that become under-employed. Or there are those that burn-out in a career that they enjoyed and need a change. I don’t have the burden/joy of a family to consider. I look at retirement as an amorphous concept. Not something of which I need a solid understanding.
What I mean is, I’m 43. I’m not retiring. I need a big enough safety net to see me into another career. I’m not guaranteed tomorrow much less 30 years.
But I probably was exposed to too much risk for someone who was going to access the money sooner than later. I can’t make heads or tails out of my numbers though. I invested in mutual funds for 10 years as a direct deduction out of my paycheck. I then sat on the investment for an additional 2 years. I could sit on it for 2 more years, but I spooked and got out last week. My total percent of increase was 13%. That’s total increase not a one year’s increase. I suck at stocks. On the other hand, when I compare my total assets to investments, I’m at about a 60% increase over that period. That’s assuming that my home has the value that the insurance company required of me to insure. I’m at 22% if my home is only valued at cost. It’s moot anyway since I’m not selling my home.
I got out last week. One shot. I know that’s not how you’re supposed to do it.
I was down 13.5% from my high point, but considerably higher than my low point.