Both presidential candidates now are pushing plans for revamping social security, which involve some portion (of the tax) being invested in securities. This will obviously generate an increase of demand for common stocks. Will this propel the market upwards? Is it a good play?-assuming now more than 40% of the US population own stocks, will the new SS program boost this to 100%?-looks like a good opportunity to me!
What say you all?
I can’t say that the market will instantly jump. If you’re someone who intends to play the market day-by-day you take larger risks. That said investing is generally a good idea. If you stick to relatively stable, solid investments the market trend over the long run is always up (menaing it might swing down or up day-by-day or even on a monthly or yearly cycle but over the last 50 years the trend is overall up). When it comes time to retire you should have a decent nest egg.
(Ever hear of the middle class housewife who took the little bit of money her husband gave her as ‘allowance’ and invested in something like IBM back in the 50’s? Apparently she never really looked at what she had and kept buying a little here and there for 30-40 years. Her children were shocked to find their mom had MILLIONS of dollars worth of stock once she had died.)
From all the statistics I’ve seen, the stock market is the best long-term investment, bar none.
I seem to remember an analysis once showing that, even if you’d put x dollars into the stock market the day before the 1929 crash (in the rough equivalent of an index fund), your return would still have been greater than any other possible (legal) investment within about twenty years.
There was another set of statistics (I’m being very vague today, aren’t I?) that I saw just last week, comparing different investment strategies in 1999. (I think the common denomenator was having $10,000 to invest, and the options were different ways or times to invest it.) Several different options were evaluated, including a perfect investor (bought at the very bottom of the market each month) and a highly imperfect one (bought at the very top of the market each month). Over the year, even the latter guy had a better return than the guy who stuck it all in bonds. (Or, I think, better than any non-stock option.)
On the other hand, if you’re looking to retire soon, you might want to be more careful. We’ve had quite a boom this last decade, and the one thing that economics history teaches is that busts inevitably follow booms. Nobody can say quite when the bust will start (well, there are people who’re trying to say, but they tend to disagree with each other), but the boom won’t go on forever. The market will make back up the lost ground (it always has in the past), but that’s not helpful if you needed the money right then.
(I tend to think putting SS money in the market – though an idea I’m mostly in favor of – will increase the current tendency of the market to follow pure supply and demand laws. i.e.: when more money chases a stable supply, the price goes up, purely because there is more money around. So it might make the market more bubble-like than it currently is, which increases the chances of a catastrophic drop. But the market would, again, recover in the long term whatever happens day-to-day or year-to-year.)
Probably some politicians own lots of stock so they push him to inform people to invest in the stock market. This makes their stock worth much more. Then they can sell it & make a profit, while you watch the price of the stock you just bought plummet because of this.
I have heard from several people(like the 2nd-3rd posters), that one should not attempt to “time the market”-meaning of course that it really doesn’t matter whwn you get in-if you hold for the long term, you should come out ahead. What about this line of reasoning applied to the real estate market-I think you can get really screwed if you buy a house at the wrong time. In my area, the price of single-family homes has skyrocketed over the last 3-years-and I am afraid that prices are unrealistically high. Some people insist that whatever the time, it is always a good investment-who is correct?
PS-I had a friend who bought a house around 10 years ago-at the height of a local RE market boom. Six months later, he had to move (lost his job)-the market really plummeted, and it took him 5 years to sell his house!
The real estate market is really a different thing. (Well, two different things: commercial is quite separate from residential, but let’s talk about the latter.)
For one thing, a home is not just an investment; as a matter of fact, it’s an investment only secondarily. You certainly wouldn’t want to lose a lot of money on owning a house (as you can if you buy at the height of the market and have to sell within a decade or so), but making a massive profit shouldn’t (and usually isn’t) a major consideration in buying a home.
If you plan to stay in the same home for fifty years, it really doesn’t matter when you buy. If you get hit with a high interest rate now, you can always refinance when the next recession hits. The question of the house’s value always going up is a trickier question, since it depends on the demand continuing to increase. Housing prices have (I believe) increased faster than inflation this entire century,which is a trend that can’t continue indefinitely (or else no one will be able to afford a house). The trend also relies on the population continuing to increase, which (in the current USA) means that immigration will not be curtailed. So there are a lot of assumptions that may not prove to be true – the absolute value of a house may drop. But, if you live in it long enough to pay off the mortgage, what you make when you sell it is gravy, anyway. As I said, a residence is not primarily an investment.
But, as you noted, housing prices can go up and down quite substantially in the short term (there was a big spike in the mid-'80s, and we’re in the middle of another one right now). I wouldn’t recommend buying a first home right now, if I had a choice, since you’ll certainly overpay. Moving up might make sense, depending on your personal situation and the housing stock in the area.
After all that, my answer is a big “maybe.” I’d be very careful buying a house right now – the rates are going up and it’s a hot seller’s market – but, if the situation is right, it can still be a good deal.
egk this is just my opinion.
The stock market is good for the long run. Use a mutual fund,don’t try to pick individual stocks.
I say wait out the Summer. You will not miss much, IMHO, and you may save your *ss. Stay in cash until the Fall. We may get a clearer picture of what will happen as companies report 2nd and 3rd quarter earnings.
I personally expect a big down in August/Sept/Oct.
Step 1 is to learn all you can about the market. A couple of my favorite places to start would be:
Bob Brinker’s site
and
The Vanguard site
Remember, there is only one person in this universe who really cares about how you end up financially. That person needs to educate himself in this area.
The Real Estate Market is BS, don’t waste your time.
Now on the other hand say if a very large earthquake hit California. I’d be there in a heartbeat buying cheap real estate from people wanting to move out of the state fast.
Now the stock market is a great place to put your cash. As long as you intend to keep it there a few years. Now is a pretty good time to buy in to the market. I bought into it when it had it’s big fall a few months ago and am doing well. Not a lot of activity will probably happen until the fall. You see in the summer time a lot of the institutional investors go on vacation. There is a lot of money on the sidelines right now…just sitting there. Sometime around fall it may really take off. So you should lock and load before that time comes. I buy individual stocks myself, but I have a strong stomach and a level head. Starting with a mutual fund is a good idea. Chose carefully. Sometimes funds have good records but then the manager that created the good record retires and some new guy takes his place (they may not tell you this when it happens) and then the fund sucks. I could type about this forever…but I gotta go do somethin’.
“Both presidential candidates now are pushing plans for revamping social security, which involve some portion (of the tax) being invested in securities. This will obviously generate an increase of demand for common stocks.”
Sure, sure, kid. The economy can go rolling along like this forever.
The only real problem is that this scenario assumes that the US is the most important country in the world, and that nothing could possibly happen to derail that idea.
I point to the “oil crisis” of 1973 for example.
I happen to think that the US is in dire straits, primarily because it has set itself up for a fall. The Japanese and Pacific Rim economies have been in the toilet for awhile now, and the European economy is just climbing out of the shithole it’s been in for the last year. Sure, North Korea and China and India and Russia and South America look like they might amount to something some day, but Africa’s basically a big lost cause. So, let’s tally it up: the US is spending LARGE amounts of dinero to keep all of these regions of the world happy, without making sure that its own citizens are…
Doesn’t this make anyone worry?
Sorry, but the US comprises approximately 300 million people. This is about 1/20th of the world’s population–do you think that this stock market phenomenon can go on forever? I don’t–but then again, 5% compounded yearly over 40 years amounts to nothing, too, so anything resembling an old-style savings account is screwed, too.
The cost of living increases. Some people make the transition. Some don’t. Will it be you? Will it be your parents? Will it be your children?
You should check out the Economist (http://www.economist.com) for an interesting perspective on all this. The Economist is a magazine from the UK and has been saying that the current US stock market is a bubble for some time. They have also been calling for some adjustments like raising interest rates, etc. which are now starting to happen. The market has been reacting to these changes since the middle of March, and it’s been pretty volatile. We’ll have to see where it ends up.
That being said, I still invest in mutual funds in a retirement account through payroll deductions twice a month. The strategy is called dollar-cost-averaging, which means that you make multiple small investments rather than one large one. So, instead of taking the risk that the price is unusually high the day you put your money in, you buy at multiple prices, some higher, some lower.
The other nice thing about dollar-cost-averaging is that you build an investing discipline. It’s a bit easier to sock away $200 a month than to save up $2000 for an annual investment.
Also, keep in mind that you have no idea who is posting to this. If you have a lot of money to invest, go to a Certified Financial Planner or an accountant or some professional. Or send it to me, I’ll take good care of it. 
The market is the best place to invest your money. Money can be made whether the market is going up or down, but historicallythe market has always gone up.
A well-planned and diversified stock portfolio could be the key to your future financial health. Don’t worry about timing the market. Some people say the key is not timing the market, but time in the market.
That said, it’s imperative that you do your homework first. Learn how the market works, and what distinguishes good companies from bad.
A superb place to start learning is The Motley Fool. Good luck, and good investing.
Sorry.
Try this: The Motley Fool
Man, I hate vB. HTML is much easier.
Try this: The Motley Fool
Stocks are the best investment for the long term, handily beating out everything else: Collectables, Real Estate, Bonds, Gold, Beanie Babies, etc etc …
Note I said “long term.” The risk is quite high for periods of less than say, 20 years. It took 25 years for the market to break even after the 1929 crash.
If you want your money to grow at a rate that exceeds inflation, and that is the name of the game, then I suggest you start by opening a Roth IRA through a mutual fund company.
http://www.troweprice.com
http://www.americancentury.com
That said, I’m also a firm believer in diversification, something that seems to have been forgotten in these days of high flying tech issues. By diversification, I don’t mean different mutual funds or stocks, but different asset classes.
Bonds provide income and safety, and should make up a portion of your portfolio. Have fun!