My dad says I should pull out of the market before "they" steal it all

[yangtui]

I have learned to ignore 95% of what I see and hear. Since I have started doing this my life keeps getting better and better.

[Nowizard]

If your investments did not recover and then some in 20 years, all of us, well not me at my age, will have much more to worry about.
Tim

[SxSW]

My father told me to stay away from stocks, because they're the way them rich people get rich -- by using stocks to steal from we poor people.

His reasoning was when business is good you have a little extra money so you buy stock with it. Then later, when business isn't as good, you need the money so you sell, but the price has gone down. The difference between what you paid and what you received is the amount they stole.

PJW

I have a headache just from reading that!

[fizxman]

I've heard all those buy and hold long run stuff for a while, but never could see how staying in during a 20-40% drop made financial sense over just stepping aside a few weeks/months to see how things develop.

You are correct. If a person knows 100% that the market is going to drop 20-40%, it's makes no sense to stay in the market. But you didn't know the market was going to drop 20-40%. Just because you pulled out and it dropped doesn't make your point.

"Ohhh, but you can't time the markets, you'll lose!!" they scream. that's for the uneducated masses, "dumb money" as Wall Street calls them.

Over the long-term, no one can time the market. This has been proven over and over and over.

Even Warren Buffet's challenge to active traders to out perform index funds, and Buffet's recommendation that people should use indexed funds, yet he is a active value trader. You really don't think the Oracle of Omaha became the master solely passively investing in index funds do you?

Warren Buffet is the chairman and CEO of a holding company for businesses. I'd say 99% of the people here are individual investors. You're comparing apples and oranges.

[bltn]

Your dad doesn’t know anything about investing.

SHM.

Perhaps ... but it is obvious that he loves and cares about his son and that is worth a hell of a lot more than investing advice.

Caring enough to try to help you with advice is great. But bad advice is worse than worthless, no matter how well intentioned.

I know more about investing than my father ever did. And my father was very bright, and ran a small business very successfully for 35 years.. And he and my mom were frugal and managed to save quite a sum of money. But he lived in time when mutual funds had 8.5% loads and high management fees, and Merrill Lynch was the standard of advice excellence and it thrived on commissions. With Jack Bogle leading the way, investors became much more sophisticated.

You know more about investing than your dad. Continue to follow the consensus of recommendations on this forum.

I m hoping to point my children in the right direction so that they learn more about investing than me.

Good luck.

[arcticpineapplecorp.]

My dad is a great guy, but should serve as a sell signal. He has a disturbing habit of jumping into the market just prior to the major meltdowns. Love the guy though.

Is your dad's name Bob? As long as he doesn't sell, he should do fine over the long term:

https://awealthofcommonsense.com/2014/0 ... ket-timer/

[ruralavalon]

"The stock market is a wonderfully efficient mechanism for transferring money from the impatient to the patient." Warren Buffett. azquotes

[BSBHead]

He is referring to the heavy hitters on wall street.

We were talking about the latest market volatility and he said he is cashing out and suggested that I do the same. He is retirement age and has had an index fund for the last 20 years and not happy with its performance as of late. Fortunately he has a pension to fall back on. I do not.

When I tried to explain 60/40, diversification, having almost 20 years before I could withdraw from a 401, etc....he would hear nothing of it and asked "didn't you learn your lesson last time?" (2008 - when I was in 100% stocks, sold, and stopped contributing for awhile, which was a mistake). He said that the stock market was for rich people when he started working and complained that Reagan did away with pensions and the 401k pretty much replaced it.

He suggested saving more into CDs, FDIC savings accounts, etc.

I must admit that he has me thinking, with the recent volatility, but I should resist the advice and stay the course, eh?

While I advocate staying in, one thought would be to make future contributions in cash/bonds, etc. That way you aren’t locking in losses, but minimizing psychological damage from buying into a market you/sad expect to tank.

Re: Pensions. This is going to be a very difficult time for pensions not fully funded. With the entire yield curve as low on rates as its ever been, pension funding status will decline across the board and remain that way for awhile. Once discount rates are finally adjusted, it will just get worse. I don’t think it’s possible pensions will not take a haircut w/o a bailout. Unfortunately, the scenario where one pension needs a bailout is the scenario where many pensions will need a bailout, so ERISA could get crushed. Needless to say, I personally wouldn’t want to be reliant on pension assets if the pension was not overfunded before these past few weeks.

[delamer]

Why didn’t he “learn his lesson” during the Great Recession? If he believes what he says, then why does he now own a stock index fund?

He’s talking out of both sides of his mouth.

Ironically, he was bragging to me a month ago how well the fund was doing. Now he cannot wait to get rid of it.

Did you point that out to him?

[Fallible]

...
I must admit that he has me thinking, with the recent volatility, but I should resist the advice and stay the course, eh?

You should invest long term based on what is right for YOU. Have you decided on an asset allocation that will accomplish that?

Pre-2008, I was all stocks. I didn't bother to educate myself until I was burned.

I'm currently at 60-40

If you feel this is the right course to hold and you've held so far, even after your dad's erroneous advice, it probably is the right one. An IPS would help, but if you have one, you could update it with this experience of your second market crash - as a reminder when the next crash comes.

I've held so far but have just been questioning that. The more I think about it, the more I think I'm on the right track. I am not too good with acronyms - what is an IPS?

An IPS is an Investment Policy Statement where you write down your investing goals and even overall financial plans and the reasons you decided on them. It's most important in a market crash when you can revisit those plans and reasons to help you stay on course.

Here's much more on an IPS from our wiki:

https://www.bogleheads.org/wiki/Investm ... _statement

[perikleez]

Nope. What made you decide to pull out a month ago? Was it the news about the virus and anticipation that it would affect the market?

Ray Dalio and others have been predicting that for since 2018.

I know a guy that’s been predicting this since 2010. I win

Actually, wasn't Ray Dalio the guy who said "cash is trash" shortly before this historic crash? LOL

yup, he sure did, but in the context of "jumping out of the [equities} train and into what?", not cash because of the inflated repo dilution of dollar. he was suggesting gold, real estate, hard assets.

https://www.youtube.com/watch?v=tZyWVxGXPHo

[perikleez]

I've heard all those buy and hold long run stuff for a while, but never could see how staying in during a 20-40% drop made financial sense over just stepping aside a few weeks/months to see how things develop.

You are correct. If a person knows 100% that the market is going to drop 20-40%, it's makes no sense to stay in the market. But you didn't know the market was going to drop 20-40%. Just because you pulled out and it dropped doesn't make your point.

"Ohhh, but you can't time the markets, you'll lose!!" they scream. that's for the uneducated masses, "dumb money" as Wall Street calls them.

Over the long-term, no one can time the market. This has been proven over and over and over.

Even Warren Buffet's challenge to active traders to out perform index funds, and Buffet's recommendation that people should use indexed funds, yet he is a active value trader. You really don't think the Oracle of Omaha became the master solely passively investing in index funds do you?

Warren Buffet is the chairman and CEO of a holding company for businesses. I'd say 99% of the people here are individual investors. You're comparing apples and oranges.

Okay, just to state the obvious, we should all know there is a spectrum of risk for those who invest/trade in this market. some have said there are only two type of individual investors: investors (passive/active) and traders (day/swing; speculators).

in an over simplified description, these are typical individual investors:
--passive investors are low risk/buy hold/indexed funds types;
--active investors make decisions on their own informed/educated assessment of various investment (P/E, value, etc) and market/macro indicators;
--traders typically focus on short-term gains using technical data, strategy, and other non-long term data, but some include specific sector/equity data

all assume a certain level of risk, and there are certainly variations between each descriptor.

yes, with his famous challenge to hedge funds (active investors), Warren Buffet proved that active investors/traders could not beat the ROIs of indexed funds "in the long run" (10yr period). And concurrently, John Bogle revolutionized individual investing with low-cost passively managed indexed mutual funds. No doubt that is the generally recognized low risk safe bet for individual investors.

https://fortune.com/2017/12/30/warren-b ... ollar-bet/

but to take a position that this is the ONLY "smart/right/correct" approach (passive/indexed) for individual investors to participate in the market and, thereby, deem all other investing approaches wrong/foolish for willing invest differently and take greater risks demonstrates a level cognitive dissonance by failing to recognize that many of these other types of investors have had note worthy gains (and losses) and many do make successful living advising others in non-passive approaches. For example, I belong to another forum that is 100% all in on the seasonal investing methods (making multiple allocations adjustments per year), with proven results.

So you will get no disagreement from me that the passive/indexed investment approach is the best approach in the long run given the natural incline of the market over time. But as Keynes said, in the long run we are all dead.

Life is short, manage your money wisely.

[Phineas J. Whoopee]

My father told me to stay away from stocks, because they're the way them rich people get rich -- by using stocks to steal from we poor people.

His reasoning was when business is good you have a little extra money so you buy stock with it. Then later, when business isn't as good, you need the money so you sell, but the price has gone down. The difference between what you paid and what you received is the amount they stole.

PJW

That is actually logical. People who don't earn much and don't have the reserves to weather a downturn, can't take the same risks that a higher income person can take.

If that person needs to buy food while they are out of a job, they are going to liquidate assets rather than starve.

Being able to invest, and grow a nest egg, is a luxury that some people don't have. Valuable job credentials and an emergency fund are prerequisites to successful long-term investing, IMO.

The real problem wasn't so much selling stock when it's down. It was buying stock with any surplus rather than banking it against an inevitable downturn.

PJW

[LilyFleur]

I worry that you might have a little too much respect for this guy and his opinions. I'm just some other guy on the internet, but the bad advice, the "us versus them" mentality, and the "I know what's best and you don't" attitude all look like red flags in terms of trustworthiness and intelligence.

Do your own research and operate using hard facts and evidence, not fleeting feelings and opinions (not your own and especially not those of others). I might be biased (again, I'm just some other guy on the internet), but I recommend checking out the Bogleheads wiki: https://www.bogleheads.org/wiki/Boglehe ... the_market

If you're feeling especially independent, maybe try running some of your own backtests over historical periods similar to the present: https://www.portfoliovisualizer.com/backtest-portfolio

I can't really argue with much of that. Hardest working guy I know and not a total idiot with finances (I've known plenty that are worse) but there's plenty of room for improvement and he doesn't care to listen to any of my opinions about the subject. I couldn't even get him to bother signing up for a 401k at his last job. Even if it were in a Money Market account, he could have at least received an employer match and would now be free to withdraw.

I guess this is why some say it's better not to discuss finances with relatives.

Thanks for the links.

I think it depends on the relative. My mom was a CFP. I had a very aggressive portfolio and she helped me get through 2008 by staying the course. I retired at age 57. I no longer have an aggressive portfolio and have enough cash and bonds to make it for 14+ years, depending how frugally I want to live. 60/40 may not be aggressive enough to get you where you need to be.