[2020] A little stock market sense

[easyrider]

If the mkt crashes will this thread disappear? Or will it get more wild?

I'm thinking when, not if, lol. In the 2007-08 crash, many retirees went back to work because their market portfolio's had tremendous declines.

Bill

 

[Brett]

I certainly don’t consider myself a stock market genius. I didn’t panic during the crashes, I listened to my financial advisor. I have made big gains, and if I did,i assume people in the know made more.

Of course. Holding diversified low cost stock index mutual funds over a long period of time (like in a 401K or a brokerage account) results in superior returns

 

[PigsDad]

I doubt you have an understanding of the articles because your variable list is the reason why for most people stocks do not actually work out. I would add to your list the number 1 reason people don't make money in stocks is they are not financially literate. You seem to think that the data is wrong. Why ? I didn't create this data. Most of it comes from data the government provides.

For you to claim I made these stats up is hilarious. You often post complaints with no real explanation other than Kurt says so. This is another example and it is too funny. I get that you did very well with stocks but most investors don't is what the data reveals.

Again, I am just quoting from the article you posted:

• Staggering data reveals 90% of retail investors underperform the broader market

And that directly contradicts the article's title (and your claim) that "90% of people lose money in stocks". This is all from your sources, Bill. I really am questioning if you can read and understand the article that you posted. It is poorly written, and the title contradicts what is in the article (another example of "shock journalism", meant to just get clicks). Obviously you fell for it.

I truly feel sorry for you that you can't read and understand the article and that you just want to keep on repeating that article's misguided title.

Kurt

 

[Brett]

Baby Boomers’ Good Times Drive the Economy​

https://www.wsj.com/us-news/baby-boomers-drive-economy-d4b72e40

"Sky-diving, concerts, classic cars. An influx of older Americans bolsters the nation’s fastest-growing city. ‘We have more fun than our daughter"

Older Americans are emerging as major drivers of the economy. Their stock portfolios, retirement savings and paid-off homes have swelled in value over decades of
growth. Hours once spent raising young children and working can now be devoted to golf, concerts and brunch. Today, Americans 55 and over control nearly 70% of U.S.
household wealth, according to the Federal Reserve.

 

[easyrider]

Again, I am just quoting from the article you posted:



And that directly contradicts the article's title (and your claim) that "90% of people lose money in stocks". This is all from your sources, Bill. I really am questioning if you can read and understand the article that you posted. It is poorly written, and the title contradicts what is in the article (another example of "shock journalism", meant to just get clicks). Obviously you fell for it.

I truly feel sorry for you that you can't read and understand the article and that you just want to keep on repeating that article's misguided title.

Kurt

I think I posted 90% of investors loose money in stocks because they are diy, meaning they are retail investors not using a financial advisor and used a
some analogy like investing on your own is like doing surgery on yourself which is definitely an over reach but makes a point.

I'm also sure a guy like you knows more than me about how to successfully invest in the markets compounding wealth over decades because that's what you did while I didn't. I like real estate and don't have any faith in stocks.

Bill

 

[PigsDad]

I think I posted 90% of investors loose money in stocks because they are diy, meaning they are retail investors not using a financial advisor and used a
some analogy like investing on your own is like doing surgery on yourself which is definitely an over reach but makes a point.

Ok, so your claim that 90% of investors lose money in stocks is simply your opinion, and you have no facts to back up that opinion. Got it.

BTW, how much skill do you think it takes to simply invest you money in an index fund?

Kurt

 

[easyrider]

Ok, so your claim that 90% of investors lose money in stocks is simply your opinion, and you have no facts to back up that opinion. Got it.

BTW, how much skill do you think it takes to simply invest you money in an index fund?

Kurt

My opinion is that all investors in stocks, lose money in stocks, at some time or another. My experience is that the gains we made in no load mutual funds were never spectacular and each time the market took a dive so did our financial statement.

I agree, it doesn't take much skill to invest in an index fund but it does require choosing the right one and having a large enough up front investment to make any real money.

Bill

 

[letsgobobby]

Bill It sounds like you should just stick with your last points: that is, stocks didn't work out for you, you were never comfortable with their volatility, you don't understand how markets work, and you are more comfortable with real estate - as opposed to making broad unsubstantiated claims that are just plain wrong.

There are a lot of ways to succeed financially and real estate is certainly one of them. We own/co-own ten doors ourselves. But we do understand stock and bond markets - I've been reading about them for forty years - and the bulk of our investments are in liquid markets. Very successfully I might add.

Yes stocks will go down someday. The Dow went down today! But over time they go up. Owning global business has been a winning strategy for hundreds of years and barring WW3 we'll continue to be a winning strategy for the next few hundred years.

Yes stocks will crash someday! I've invested through the 1987 Black Monday crash, the tech bubble and crash, the Great recession, and COVID. I haven't ever sold except to rebalance. I'm confident a future crash won't bother me because I have an asset allocation suitable for my risk tolerance and my need and ability to take risk.

If you do choose to educate yourself about financial markets, the Bogleheads website maintains a good reading list.

Book recommendations and reviews - Bogleheads

www.bogleheads.org

 

[easyrider]

Bill It sounds like you should just stick with your last points: that is, stocks didn't work out for you, you were never comfortable with their volatility, you don't understand how markets work, and you are more comfortable with real estate - as opposed to making broad unsubstantiated claims that are just plain wrong.

There are a lot of ways to succeed financially and real estate is certainly one of them. We own/co-own ten doors ourselves. But we do understand stock and bond markets - I've been reading about them for forty years - and the bulk of our investments are in liquid markets. Very successfully I might add.

Yes stocks will go down someday. The Dow went down today! But over time they go up. Owning global business has been a winning strategy for hundreds of years and barring WW3 we'll continue to be a winning strategy for the next few hundred years.

Yes stocks will crash someday! I've invested through the 1987 Black Monday crash, the tech bubble and crash, the Great recession, and COVID. I haven't ever sold except to rebalance. I'm confident a future crash won't bother me because I have an asset allocation suitable for my risk tolerance and my need and ability to take risk.

If you do choose to educate yourself about financial markets, the Bogleheads website maintains a good reading list.

Book recommendations and reviews - Bogleheads

www.bogleheads.org

The thing I'm not comfortable with is the buy and hold for 40 years in mutual funds and hoping that when I want my money the market is good. There is no stop loss with a mutual fund. Asset allocation does help but usually comes at the expense of profits, imo. I'm content with a few stocks and a brokerage account that I control. Yes, I do like investment real estate but as you know, it isn't as easy as it looks.

Bill

 

[PigsDad]

The thing I'm not comfortable with is the buy and hold for 40 years in mutual funds and hoping that when I want my money the market is good. There is no stop loss with a mutual fund. Asset allocation does help but usually comes at the expense of profits, imo. I'm content with a few stocks and a brokerage account that I control. Yes, I do like investment real estate but as you know, it isn't as easy as it looks.

Of course asset allocation comes at a cost, but it also greatly reduces the risk. That is the tradeoff.

I often hear people who are scared of investing in the stock market say the same thing: what if there is a down market when I want to retire? I always reply with asking them if they think they will need 100% of their money the instant they retire. The answer is, of course, no. And if you started to allocate some of your investments toward safer funds (bonds, etc.) as you approach retirement, then it is from those funds you start withdrawing so you can allow the equity-heavy investments to continue to do their long-term growth thing, and then re-allocate the investment mix when it makes sense. For most people, when they retire they are going to live for several more decades. It wouldn't make any sense to stop with equity investments the instant they retire.

And real estate has it own set of challenges. First and foremost it is generally illiquid and carries a pretty high cost to convert to cash. Also, you worry about the timing of the stock market being down when you want to retire -- real estate has the exact same risk. Think about 2006-2012 when the residential real estate market crashed and didn't appreciate during that time (6 very long years of negative growth!):

That is a scary chart if you only invest in real estate and wanted to retire in 2007.

The best answer to all of this is, IMNSHO, diversification. You may think I am just gung-ho for stocks, but if I just look at my total net worth (including personal homes), my asset allocation is roughly 22% bond/short term, 34% equities and 44% real estate. If I take out the personal homes (which don't produce any income), I'm at 29% bond/short term, 44% equities and 27% income-producing real estate.

As a newly-retired person, I am comfortable in most any downturn with a mix like that. Most of my gains come from the equities portion of my portfolio, and I can reallocate if needed in an instant; I can't say that about the real estate portion.

Kurt

 

[easyrider]

That is a scary chart if you only invest in real estate and wanted to retire in 2007.

It was during the 2007 crash and lower housing prices that we picked up a couple more rentals. Since the 80's, any time the economy crashed, people always paid their rent. In the 2007 crash there were many caught trying to retire that had to put it off because their retirement accounts tanked.

It seems like you have successfully figured out your retirement and I'm happy for you.

Bill

 

[Brett]

The thing I'm not comfortable with is the buy and hold for 40 years in mutual funds and hoping that when I want my money the market is good. There is no stop loss with a mutual fund. Asset allocation does help but usually comes at the expense of profits, imo. I'm content with a few stocks and a brokerage account that I control. Yes, I do like investment real estate but as you know, it isn't as easy as it looks.

Bill

That's why investors shift funds from stocks to bonds and CD's as they age. After 40 years of investing I don't worry whether the "market" is up or down

.

 

[Brett]

Dow, S&P Hit Record Highs
Small-cap stocks outperformed mega-cap technology giants
Dow surge to record highs as blue chip index gains over 700 points

https://finance.yahoo.com/news/stoc...?rdrctId=05e0184e-fcd6-46f5-a52e-5fb5012b6029



"The small-cap index has outperformed the Nasdaq Composite by about 11 percentage points over the past five trading days, the largest degree of outperformance since December 2000"

 

[rapmarks]

And if someone hadn’t turned his head, it would have been a different story this week. Things can change pretty fast

 

[Elan]

Dow, S&P Hit Record Highs
Small-cap stocks outperformed mega-cap technology giants
Dow surge to record highs as blue chip index gains over 700 points

https://finance.yahoo.com/news/stoc...?rdrctId=05e0184e-fcd6-46f5-a52e-5fb5012b6029



"The small-cap index has outperformed the Nasdaq Composite by about 11 percentage points over the past five trading days, the largest degree of outperformance since December 2000"

Definitely some rotation going on in the past couple weeks.

ETA: TNA, a 3x leveraged small cap ETF has moved from $36 to over $50 in 6 trading sessions.

 

[letsgobobby]

this is what the US stock market has done over the last 40 years. Little daily or weekly moves mean nothing. In the long run the economy grows and wealth is created faster than inflation due to productivity gains. Investing in this wealth creation is a winning move.

 

[WaikikiFirst]

this is what the US stock market has done over the last 40 years. Little daily or weekly moves mean nothing. In the long run the economy grows and wealth is created faster than inflation due to productivity gains. Investing in this wealth creation is a winning move.

It really is that simple, with the caveat that a 1984 starting point is a heckuva nice starting point, and yes, starting and end-pts do matter, even though the underlying msg is true.

 

[PigsDad]

And if someone hadn’t turned his head, it would have been a different story this week. Things can change pretty fast

Or the market would have gone higher. We really don't know.

Kurt

 

[pedro47]

I wonder how much money has Warren Buffets and his Berkshire Hathaway fund loss in the stock market in the last 45 Years?

 

[Luvtoride]

The thing I'm not comfortable with is the buy and hold for 40 years in mutual funds and hoping that when I want my money the market is good.

Bill

You're describing Sequence of Return Risk (SORR) which can have a detrimental impact on your assets (and could be just plain UNLUCKY). That's one of the reasons why a financial plan should include buckets based on timing of when you will be needing to withdraw funds. Having "safe" money that is not subject to market conditions for the earlier withdrawls helps to alleviate that concern.

 

[easyrider]

You're describing Sequence of Return Risk (SORR) which can have a detrimental impact on your assets (and could be just plain UNLUCKY). That's one of the reasons why a financial plan should include buckets based on timing of when you will be needing to withdraw funds. Having "safe" money that is not subject to market conditions for the earlier withdrawls helps to alleviate that concern.

Other than savings accounts of which only $250,000 is FDIC insured what would those buckets be ?

Bill

 

[Luvtoride]

Other than savings accounts of which only $250,000 is FDIC insured what would those buckets be ?

Bill

Bill, there are plenty of vehicles depending on your time horizon and your needs. You need to be open minded about these products and understand what you are investing in.
I learned of these through my financial advisor (not a bad thing at all).

 

[letsgobobby]

Other than savings accounts of which only $250,000 is FDIC insured what would those buckets be ?

Bill

you can have multiple FDIC accounts titled differently at a single institution (individual, joint, trust, business, etc), you can have multiple institutions, you can use CDARS, you can use non FDIC extremely low risk money market or short term treasury accountas. the list goes on and on.

In general low risk means US government bond investments, not necessarily FDIC insured accounts.

The point is most folks should have less in atocks and more in bonds as they approach retirement.

 

[Luvtoride]

The point is most folks should have less in atocks and more in bonds as they approach retirement.

Bobby, another generalization which may not apply to all. Having an adequate amount of "safe funds" allows me to invest my later (longer time-frame) bucket funds in a pretty aggressive way (higher stock percentage). I'm very comfortable with this but it depends on each individual's risk appetite.

 

[letsgobobby]

Bobby, another generalization which may not apply to all.

that’s why I wrote “most”