Stock Market is the bottom in?

[chummer]

The problem is that we never know when a crash comes until it is here. Market timing is a tough game. In general, I don't play that game. The primary reason I was moving into cash was because I'm nearing retirement and was almost 100% in at the time. My only timing aspect was starting to move it when market was at new highs.

Well that makes more sense

 

[H20fwler]

Think of it this way. If I have a 30 year mortgage at 3% (for sake of argument), I know I can make fairly stable mortgage payments for 30 years and pay it off. Or, I can pay extra each month, and (for sake of argument) I can pay it off in 15 years? I will pay the same principle but substantially less interest over the, now shorter, life of the loan. So, what happens to that extra money that I'm paying each month if I don't put it toward the mortgage? Well, if I spend it to live a higher lifestyle, putting it toward the mortgage would have been a good investment. But, what if I dollar cost averaged it into the broad market each month (S&P)? Over 30 years, a 6% return is fairly reliable.

So, what happens if I loose my job part way through. With the 30 year mortgage, I'm still obligated to make that minimum monthly mortgage payment regardless of how much I've been paying up to this point each month. With no income, if I can't make the payments, I may be forced to sell the house or be foreclosed upon. If instead, I had been putting that money into the market which is much more liquid and earning on it, I can now dollar cost average out of the market paying that mortgage each month until the money runs out. That gives me time to get another job and go back to making mortgage payments from my income stream.

So, in reality you do hit the nail on the head, but it is not financial. It is physiological. If your personality is such that you sleep better at night knowing your house is paid off, there is value for you in paying it off early. If you do the math, it all depends on what kind of mortgage rate you can get at the time, how favorably mortgages are treated from a tax perspective, and if you believe the long-term market averages are a reasonable predictor for the next 30 years.

Thanks,

Jack

I don’t like debt at all and luckily have been able to pay property off fast.
Yes it is probably all in my head but keeps my life calmer and things simple. Right now I can make more money at work and even extra if I needed too.
And again God forbid if something would happen and economy goes bad and interest high my assets will be safe and protected.

 

[g squared 23]

I think ya meant philosophical and not physiological, but your point is well taken; you cannot easily “eat your home”, or easily access the equity in your home if you paid extra and then lose a job or have a life crisis.


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[yoderjac]

I think ya meant philosophical and not physiological, but your point is well taken; you cannot easily “eat your home”, or easily access the equity in your home if you paid extra and then lose a job or have a life crisis.


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No, I did mean psychological. Some of us have a psyche that feels much more comfortable not having debt and sleep much better at night. There is nothing wrong with that as long as we understand that is why we make the choice not because it is a better financial decision. The lack of liquidity in that equity is why I'm considering taking out a mortgage on the home we plan to build, not because I need the mortgage to afford the home. Who wants to lend money to a retired guy with a much lower income stream than someone working with a higher income stream. Once you pay down your home, if a job loss occurs, unless you can sell (and you still have to find a place to live), the only option is a home equity loan at a higher interest rate. Of course, if you just lost your job, you are unlikely to get one. If interest rates are low enough, I'm considering getting a mortgage right before I retire and investing that money.

Thanks,

Jack

 

[g squared 23]

Ok well you originally wrote “physiological” as opposed to “psychological” and I was confused.

 

[yoderjac]

Ok well you originally wrote “physiological” as opposed to “psychological” and I was confused.

Spell correction...not the first time it burned me....

 

[Tree Spud]

Ok well you originally wrote “physiological” as opposed to “psychological” and I was confused.

I am sure if most people read what they wrote before posting they would be confused too!

 

[yoderjac]

I am sure if most people read what they wrote before posting they would be confused too!

Yep, I've had to edit several posts after posting and re-reading them.

 

[Bowsnbucks]

The problem is that we never know when a crash comes until it is here. Market timing is a tough game. In general, I don't play that game. The primary reason I was moving into cash was because I'm nearing retirement and was almost 100% in at the time. My only timing aspect was starting to move it when market was at new highs.

Jack -
You mentioned moving into cash as you near retirement. I'm going to assume you're not ALL in cash or equivalents?? With bonds yielding a pittance, and MM & CD's paying squat - what about dividend-paying stocks?? For diversification, there are several good mutual funds that focus on div-payers. With the economy being bad because of Covid, I wouldn't - personally - risk getting into high-yielding junk bonds because of increased risk beyond what's expected in GOOD economies. Too many questions on the horizon as to defaults.

Sources of reliable income as anyone nears retirement?? Opinions??

 

[yoderjac]

Jack -
You mentioned moving into cash as you near retirement. I'm going to assume you're not ALL in cash or equivalents?? With bonds yielding a pittance, and MM & CD's paying squat - what about dividend-paying stocks?? For diversification, there are several good mutual funds that focus on div-payers. With the economy being bad because of Covid, I wouldn't - personally - risk getting into high-yielding junk bonds because of increased risk beyond what's expected in GOOD economies. Too many questions on the horizon as to defaults.

Sources of reliable income as anyone nears retirement?? Opinions??

I can make no case for bonds ever, except for the lower volatility, sleep better, argument. If I look historically, it seems I can always get a better long-term return with cash and stocks only. When I look at downturns in the market historically, it almost always recovers in 3 to 4 years back to previous levels. So, my plan is to keep about 4 years of need in cash. Each time I need to eat from my nest egg (say monthly or quarterly), I'll take a look at the total value. If it is less than where I started (market is down), I'll eat from my cash bucket. As soon as the market recovers, I'll refill the cash bucket and eat from stocks.

There is way too much risk in individual stocks for a retired guy. Unless you think financial management is "fun" (I'd rather be outdoors), I'm much better off with a broad index like S&P. I may put a little money in fairly broad sectors, but I can't diversify enough to buy individual stocks.

So, for me, it is pretty much S&P and money market. The percentage in each will change over time with my method, based on how the market is doing when I need funds. My objective in retirement is not to make money. It is to preserve buying power.

Thanks,

Jack

 

[Bowsnbucks]

^^^^^ I've never done individual stocks either because I don't want to spend life in front of a screen worrying & trying to time the market. S & P, Total Stock Market indexes and maybe a mutual fund full of div-payers. Enough cash to cover a couple years as well, beyond Social Security, pension, and 401-K's. If we live as we do now, we should be able to live off the dividends & interest generated by our long-held investments. NO yachts for us - or flashy cars. Peace of mind has a value all it's own.

 

[yoderjac]

^^^^^ I've never done individual stocks either because I don't want to spend life in front of a screen worrying & trying to time the market. S & P, Total Stock Market indexes and maybe a mutual fund full of div-payers. Enough cash to cover a couple years as well, beyond Social Security, pension, and 401-K's. If we live as we do now, we should be able to live off the dividends & interest generated by our long-held investments. NO yachts for us - or flashy cars. Peace of mind has a value all it's own.

I gambled when I was young. I'm a slow learner and couldn't seem to learn from others. I had to make the mistake myself. Just like a casino, a few wins kept me hooked until enough losses brought me to my senses. I've got a high tech background and thought some fantastic products would make some small companies rich. Turns out, great products are a small part of a successful business. Began to dig into the financial part of business. then looked at mutual fund managers performance. Most of them have a much stronger financial background than I do , but over the long haul none beat the market on a statistical basis.

I finally learned the broad market is fairly reliable over the long haul, but if the pros were only compensated by their individual performance, not the amount of assets they manage, none would be rich.

As far as dividend payers go, I don't like them and I don't like open ended mutual funds for the same reason. Taxes. They are fine inside an IRA, 401K, traditional or Roth. In a Roth, you are not paying taxes on the earnings. In a traditional, you are paying earned income tax on principle and earnings. Outside those containers, I want to be able to control when I get a payout from the company. Personally, I prefer capital gains when I sell. That is because of all the capital loss carry-over I have from when I was young and foolish.

Thanks,

Jack

 

[OakSeeds]

I've enjoyed reading these posts about investments/retirement and related aspects (e.g., dividends, equities vs cash, timing, etc). I raised the issue of FAANG ... but only Mr. Buckly responded directly with acknowledgement that FAANG "is the stock market." In the first 16 pages of this thread, Amazon was mentioned 2 times (once as a forlorn lost opportunity) and once as part of a family profit sharing activity. Apple was mentioned 3-5 times, while Netflix, Facebook and Google (Alphabet) were not mentioned. These 5 stocks experienced last-5yr growth rates of Amazon (AMZN (550+%), Netflix (NFLX (550%), Apple (AAPL 482%), Facebook (FB 162%) and Google/Alphabet (GOOG 207%) while the S & P grew a much lower 108%. Where would you rather have your money? With share prices over $2,000 (AMZN/GOOG), you might not be comfortable buying relatively few shares if your resources are modest (said gently). Netflix is 500+ share, Facebook is 268 and Apple is the least expensive at $136 (half of FB). There is a way you can own almost all of these stocks and I believe might be an excellent mechanism for younger folks and others (using 401's, 403B's Keogh, Roth and other retirement vehicles) to prepare for retirement by dollar cost averaging into mutual funds that hold relatively large positions in these Nasdaq/tech stocks. Check out ...

https://www.troweprice.com/personal-investing/tools/fund-research/TRBCX?adobe_mc_sdid=SDID=74F84A2267B20B74-2EAFA301F5FE3B31|MCORGID=D15D15F354F647770A4C98A4@AdobeOrg|TS=1612639087&adobe_mc_ref=https://www.google.com/#content-summary

https://fundresearch.fidelity.com/mutual-funds/summary/316389303

In the top 6 largest holdings in each of these funds, at least 4 of the FAANG are included. While Netflix was a wildly profitable stock since it's inception, it is not among the top holdings in either fund ... perhaps DIS streaming has something to do with that(?). Microsoft has garnered a top 5 spot.

Now, here is the Motley Fool advice about which is the better fund! ... https://www.fool.com/investing/2020/better-growth-fund-fidelity-blue-chip-t-rowe-price/

Vanguard has a similiar fund; not quite as good a performer but perhaps the only retirement fund mutual-fund company someone is able to access.
https://investor.vanguard.com/mutual-funds/profile/VIGRX

As for me; I don't give advice, I only point out financial opportunities worthy of investigation.

 

[chummer]

Good post. I don’t mention the ones you mentioned because I assume everyone has them one way or another and there is no interesting angle to them. I was going to buy 100k of Amazon when it was 1500. My guy then showed me how much Amazon I owned in other places so I only bought 7 shares. Bad move on my part. I have 50% of my 401k going into a tech fund that holds all the ones you mentioned and a good chunk of a roll over in a similar fund. I also have Disney and MasterCard which I don’t think you can go wrong with. Your post points out what you should have as a base, no one should start out with a lot of the crap we talk about on here. Although I have appeared to hit a home run with Dermtech, DMTK. When it hits 800 I am retiring.

 

[yoderjac]

I've enjoyed reading these posts about investments/retirement and related aspects (e.g., dividends, equities vs cash, timing, etc). I raised the issue of FAANG ... but only Mr. Buckly responded directly with acknowledgement that FAANG "is the stock market." In the first 16 pages of this thread, Amazon was mentioned 2 times (once as a forlorn lost opportunity) and once as part of a family profit sharing activity. Apple was mentioned 3-5 times, while Netflix, Facebook and Google (Alphabet) were not mentioned. These 5 stocks experienced last-5yr growth rates of Amazon (AMZN (550+%), Netflix (NFLX (550%), Apple (AAPL 482%), Facebook (FB 162%) and Google/Alphabet (GOOG 207%) while the S & P grew a much lower 108%. Where would you rather have your money? With share prices over $2,000 (AMZN/GOOG), you might not be comfortable buying relatively few shares if your resources are modest (said gently). Netflix is 500+ share, Facebook is 268 and Apple is the least expensive at $136 (half of FB). There is a way you can own almost all of these stocks and I believe might be an excellent mechanism for younger folks and others (using 401's, 403B's Keogh, Roth and other retirement vehicles) to prepare for retirement by dollar cost averaging into mutual funds that hold relatively large positions in these Nasdaq/tech stocks. Check out ...

https://www.troweprice.com/personal-investing/tools/fund-research/TRBCX?adobe_mc_sdid=SDID=74F84A2267B20B74-2EAFA301F5FE3B31|MCORGID=D15D15F354F647770A4C98A4@AdobeOrg|TS=1612639087&adobe_mc_ref=https://www.google.com/#content-summary

https://fundresearch.fidelity.com/mutual-funds/summary/316389303

In the top 6 largest holdings in each of these funds, at least 4 of the FAANG are included. While Netflix was a wildly profitable stock since it's inception, it is not among the top holdings in either fund ... perhaps DIS streaming has something to do with that(?). Microsoft has garnered a top 5 spot.

Now, here is the Motley Fool advice about which is the better fund! ... https://www.fool.com/investing/2020/better-growth-fund-fidelity-blue-chip-t-rowe-price/

Vanguard has a similiar fund; not quite as good a performer but perhaps the only retirement fund mutual-fund company someone is able to access.
https://investor.vanguard.com/mutual-funds/profile/VIGRX

As for me; I don't give advice, I only point out financial opportunities worthy of investigation.

I'd rather have my money in the broad market than any high flyer. Today's darling is tomorrow's dog.

 

[Gator]

Good post. I don’t mention the ones you mentioned because I assume everyone has them one way or another and there is no interesting angle to them. I was going to buy 100k of Amazon when it was 1500. My guy then showed me how much Amazon I owned in other places so I only bought 7 shares. Bad move on my part. I have 50% of my 401k going into a tech fund that holds all the ones you mentioned and a good chunk of a roll over in a similar fund. I also have Disney and MasterCard which I don’t think you can go wrong with. Your post points out what you should have as a base, no one should start out with a lot of the crap we talk about on here. Although I have appeared to hit a home run with Dermtech, DMTK. When it hits 800 I am retiring.

I will gladly say thank you for DMTK


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[J B]

Yes- thanks for your recommendation on Dmtk. It finished the week very strong!

 

[SD51555]

I gambled when I was young. I'm a slow learner and couldn't seem to learn from others. I had to make the mistake myself. Just like a casino, a few wins kept me hooked until enough losses brought me to my senses. I've got a high tech background and thought some fantastic products would make some small companies rich. Turns out, great products are a small part of a successful business. Began to dig into the financial part of business. then looked at mutual fund managers performance. Most of them have a much stronger financial background than I do , but over the long haul none beat the market on a statistical basis.

I finally learned the broad market is fairly reliable over the long haul, but if the pros were only compensated by their individual performance, not the amount of assets they manage, none would be rich.

As far as dividend payers go, I don't like them and I don't like open ended mutual funds for the same reason. Taxes. They are fine inside an IRA, 401K, traditional or Roth. In a Roth, you are not paying taxes on the earnings. In a traditional, you are paying earned income tax on principle and earnings. Outside those containers, I want to be able to control when I get a payout from the company. Personally, I prefer capital gains when I sell. That is because of all the capital loss carry-over I have from when I was young and foolish.

Thanks,

Jack

I require a dividend. I could care less about the money. Instead, dividends are the vitals of a company. Companies that have no revenue, no profits, and no cashflow seem like a gamble to me. They're ripe to get cornholed by the short sellers, or blown to bits by chasers.

Give me a company that pays a 1.0% - 2.5% dividend and has raised it 10+% each year for the last five years. Show me a cluster like that, and I will show you a cluster of solid winners. The higher those yields go, odds are you're getting into worse and worse companies. It ain't a hard and fast rule, but it is a darn good starting point for places to lose money.

 

[Doublewide]

Good post. I don’t mention the ones you mentioned because I assume everyone has them one way or another and there is no interesting angle to them. I was going to buy 100k of Amazon when it was 1500. My guy then showed me how much Amazon I owned in other places so I only bought 7 shares. Bad move on my part. I have 50% of my 401k going into a tech fund that holds all the ones you mentioned and a good chunk of a roll over in a similar fund. I also have Disney and MasterCard which I don’t think you can go wrong with. Your post points out what you should have as a base, no one should start out with a lot of the crap we talk about on here. Although I have appeared to hit a home run with Dermtech, DMTK. When it hits 800 I am retiring.

If DMTK hits 800 I'll be paying for your air fare to Wisconsin , and licenses, and you can hunt my land for a week . It's the least I could do for the tip, plus you'll be retired and looking for new experiences.

 

[yoderjac]

I require a dividend. I could care less about the money. Instead, dividends are the vitals of a company. Companies that have no revenue, no profits, and no cashflow seem like a gamble to me. They're ripe to get cornholed by the short sellers, or blown to bits by chasers.

Give me a company that pays a 1.0% - 2.5% dividend and has raised it 10+% each year for the last five years. Show me a cluster like that, and I will show you a cluster of solid winners. The higher those yields go, odds are you're getting into worse and worse companies. It ain't a hard and fast rule, but it is a darn good starting point for places to lose money.

There is a difference between a company that pays no dividend and one that has no profits or free cash flow. I would much prefer a company to do a stock buy back rather than a dividend if they feel they can't use the profits to grow and generate more profit. Outside retirement containers, I control when pay capital gains tax. The company controls when I pay tax on dividends.