Just a quick question

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
FF-Medic
Posts: 61
Joined: Fri May 07, 2010 5:19 pm

Just a quick question

Post by FF-Medic » Thu Sep 02, 2010 5:09 pm

So in my newness there is something that seems obvious to me but I don't see others doing it and I'm not sure why (Maybe it's more of tuning out the noise which is harder than I thought).

It seems to me that right now while things are so low is the time for young investors such as myself to be putting every extra dollar into the market as the only way to go is pretty much up which may take years but hey I've got 30+ years to go. Is there something I'm missing or what?

kenbrumy
Posts: 394
Joined: Sat Feb 28, 2009 5:13 pm

Post by kenbrumy » Thu Sep 02, 2010 5:15 pm

Things could go up or down. No one knows. History says that buying after a major drop works out well. It might or it might not.

Unfortunately, no one here can tell the future any better than anyone else.

I started buying in mid-1982. People said I was crazy. I'm doing ok now.

kd2008
Posts: 558
Joined: Sun Feb 15, 2009 6:19 pm

Post by kd2008 » Thu Sep 02, 2010 5:15 pm

Without a context into your situation, your need for returns on investments it is difficult to make a generalized judgment. Are you "sure" the market "will not" fall further 50% in the next year and will only go up? if you have a magic crystal ball, then by all means go ahead.

User avatar
Scott S
Posts: 1400
Joined: Mon Nov 24, 2008 3:28 am
Location: SW CR IA US NA PE

Re: Just a quick question

Post by Scott S » Thu Sep 02, 2010 5:16 pm

FF-Medic wrote:So in my newness there is something that seems obvious to me but I don't see others doing it and I'm not sure why (Maybe it's more of tuning out the noise which is harder than I thought).

It seems to me that right now while things are so low is the time for young investors such as myself to be putting every extra dollar into the market as the only way to go is pretty much up which may take years but hey I've got 30+ years to go. Is there something I'm missing or what?
That's what I'm doing. I think other people are staying out because they worry the market will go lower.

(And it might!)

- Scott
My Plan: (Age-10)% in bonds until I reach age 60, 50/50 thereafter. Equity split: 50/50 US/Int'l, Bond split: 50/50 TBM/TIPS.

User avatar
cinghiale
Posts: 1130
Joined: Wed Oct 17, 2007 4:37 pm

Post by cinghiale » Thu Sep 02, 2010 5:40 pm

FF-Medic wrote:
It seems to me that right now while things are so low...
Can you provide a bit more detail on what you mean by "things?"

And, if the US stock market is part of the answer, you may need to think through why you think that the Dow at 10,300 (or so) is, in fact, "low."

You may be well justified in taking on some additional risk due to your age and risk tolerance. But I would question doing so on the basis of a perception that "things" are at bargain prices. Such a determination can only be made in hindsight.
"We don't see things as they are; we see them as we are." Anais Nin | | "Sometimes the first duty of intelligent men is the restatement of the obvious." George Orwell

FF-Medic
Posts: 61
Joined: Fri May 07, 2010 5:19 pm

Post by FF-Medic » Thu Sep 02, 2010 5:53 pm

True true I'm sorry I was having rambling thoughts, what it spurred from was right now I have the opportunity to work a good amount of part time in addition to my full time, with help here I have already crafted an IMO well designed efficient investment plan. I was thinking that while the PT was there maybe I should be working all of it I can and putting it into investments.

No I do not have a magic crystal ball nor can I predict the future.

Maybe I was thinking off kilter.

Fallible
Posts: 6364
Joined: Fri Nov 27, 2009 4:44 pm
Contact:

Re: Just a quick question

Post by Fallible » Thu Sep 02, 2010 5:58 pm

FF-Medic wrote:
It seems to me that right now while things are so low is the time for young investors such as myself to be putting every extra dollar into the market as the only way to go is pretty much up which may take years but hey I've got 30+ years to go. Is there something I'm missing or what?
The market will go up and down and no one can never know for certain how up or how down or when. You might want to consider dollar-cost averaging, regularly investing a set amount that allows you to buy more shares when the market's down and fewer when it's up, which cuts costs. That was recommended to me when I started investing many years ago and I believe it worked quite well.

User avatar
tetractys
Posts: 4596
Joined: Sat Mar 17, 2007 3:30 pm
Location: Along the Salish Sea

Re: Just a quick question

Post by tetractys » Thu Sep 02, 2010 6:04 pm

FF-Medic wrote:So in my newness there is something that seems obvious to me but I don't see others doing it and I'm not sure why (Maybe it's more of tuning out the noise which is harder than I thought).

It seems to me that right now while things are so low is the time for young investors such as myself to be putting every extra dollar into the market as the only way to go is pretty much up which may take years but hey I've got 30+ years to go. Is there something I'm missing or what?
Yes many here are tuning out the noise; even though it's human nature to sneeze every so often. And yes, it's a good time to invest, according to your Investment Plan that should cover all market conditions.

Your not missing a thing. -- Tet
RESISTANCE IS FRUITFUL

Scottner
Posts: 111
Joined: Tue Mar 16, 2010 9:50 pm

Re: Just a quick question

Post by Scottner » Thu Sep 02, 2010 7:19 pm

Fallible wrote:You might want to consider dollar-cost averaging, regularly investing a set amount that allows you to buy more shares when the market's down and fewer when it's up, which cuts costs. That was recommended to me when I started investing many years ago and I believe it worked quite well.
This is what I did and it turned out to be a good option for me at that particular time. The market began moving lower 2 months after my initial purchase. The next 5 purchases were all lower in price than the first 3, by several dollars per share. I would have had buyer's remorse had I gone all in on the initial purchase. For my bond purchases though, I would have been better off going all in to begin with because they were never as cheap as they were when I made my first purchase. Fortunately, bonds are a much smaller part of my portfolio.

Whether DCA is a good idea or not boils down to what the market does following your initial purchase. I think the main benefit though is psychological, especially if the market tanks while you are accumulating shares.

Default User BR
Posts: 7501
Joined: Mon Dec 17, 2007 7:32 pm

Re: Just a quick question

Post by Default User BR » Thu Sep 02, 2010 9:26 pm

FF-Medic wrote:It seems to me that right now while things are so low is the time for young investors such as myself to be putting every extra dollar into the market as the only way to go is pretty much up which may take years but hey I've got 30+ years to go. Is there something I'm missing or what?
The general recommendation is for a person in their 20s to be somewhere between 80% - 70% stocks. Going much higher historically hasn't provided much more in the way of returns, but does bring a lot more volatility in. Having a core holding of bonds provides rebalancing capital when stocks fall off the table at some point.


Brian

RezH
Posts: 47
Joined: Tue Aug 17, 2010 8:42 am

Post by RezH » Thu Sep 02, 2010 10:18 pm

Is there really any true equity bargains right now? With the market where it is at right now, I am not so sure. Maybe large cap. That has underperformed for years now. I'm waiting on a rollover from IRA to IRA, and it is out of my hands (government). It will be the bulk of my fixed income allocation, so I'm actually slightly encouraged because bonds are slipping a bit.

Valuethinker
Posts: 34905
Joined: Fri May 11, 2007 11:07 am

Re: Just a quick question

Post by Valuethinker » Fri Sep 03, 2010 12:17 pm

FF-Medic wrote:So in my newness there is something that seems obvious to me but I don't see others doing it and I'm not sure why (Maybe it's more of tuning out the noise which is harder than I thought).

It seems to me that right now while things are so low is the time for young investors such as myself to be putting every extra dollar into the market as the only way to go is pretty much up which may take years but hey I've got 30+ years to go. Is there something I'm missing or what?
If this is 1979 then yes.

If this is more like 1968 then no. 12 years of falling behind inflation await.

If this is 1932 then no-- markets rallied, and went straight back down.

Bad stock market cycles can last a decade or more. We could well be in the middle of a 20 year slump.

Note the valuation of stocks is by no measure 'cheap' compared to what stocks were trading at in 1946 or 1979, say.

That said I think negative sentiment is overdone right now.

YDNAL
Posts: 13774
Joined: Tue Apr 10, 2007 4:04 pm
Location: Biscayne Bay

Re: Just a quick question

Post by YDNAL » Fri Sep 03, 2010 12:42 pm

FF-Medic wrote:It seems to me that right now while things are so low is the time for young investors such as myself to be putting every extra dollar into the market as the only way to go is pretty much up which may take years but hey I've got 30+ years to go. Is there something I'm missing or what?
Image

First, with the S&P 500 currently above 1,100, why do you say that "things are so low"?

Second, how do you see the S&P500 chart (above) from 2010-2040?
Landy | Be yourself, everyone else is already taken -- Oscar Wilde

User avatar
Scott S
Posts: 1400
Joined: Mon Nov 24, 2008 3:28 am
Location: SW CR IA US NA PE

Post by Scott S » Fri Sep 03, 2010 1:01 pm

RezH wrote:Is there really any true equity bargains right now? With the market where it is at right now, I am not so sure. Maybe large cap. That has underperformed for years now. I'm waiting on a rollover from IRA to IRA, and it is out of my hands (government). It will be the bulk of my fixed income allocation, so I'm actually slightly encouraged because bonds are slipping a bit.
Gimme 20 years or so, and then I'll be able to tell you what was cheap in 2010. :wink:

- Scott
My Plan: (Age-10)% in bonds until I reach age 60, 50/50 thereafter. Equity split: 50/50 US/Int'l, Bond split: 50/50 TBM/TIPS.

User avatar
HomerJ
Posts: 11206
Joined: Fri Jun 06, 2008 12:50 pm

Re: Just a quick question

Post by HomerJ » Fri Sep 03, 2010 1:07 pm

Valuethinker wrote:
FF-Medic wrote:So in my newness there is something that seems obvious to me but I don't see others doing it and I'm not sure why (Maybe it's more of tuning out the noise which is harder than I thought).

It seems to me that right now while things are so low is the time for young investors such as myself to be putting every extra dollar into the market as the only way to go is pretty much up which may take years but hey I've got 30+ years to go. Is there something I'm missing or what?
If this is 1979 then yes.

If this is more like 1968 then no. 12 years of falling behind inflation await.

If this is 1932 then no-- markets rallied, and went straight back down.

Bad stock market cycles can last a decade or more. We could well be in the middle of a 20 year slump.

Note the valuation of stocks is by no measure 'cheap' compared to what stocks were trading at in 1946 or 1979, say.

That said I think negative sentiment is overdone right now.
Anyone in their 20s who went all in in 1932 or 1968 did just fine 30 years later...

The market may drop again, but if you got 30 years, buying stocks at 10,000 will very likely seem very cheap in 2040... Obviously, it would be better if you could buy in at 6,000, but we may not go back to there, and if you wait, you may end up buying at 14,000 instead..

Who knows?

I would be 90/10 or 80/20 right now if I was in my 20s... and I wouldn't even worry about what the market is doing... You should HOPE we're in the middle of a 20-year slump (very likely, in my mind). That way you can buy around 10,000 for another 10 years...

Valuethinker
Posts: 34905
Joined: Fri May 11, 2007 11:07 am

Re: Just a quick question

Post by Valuethinker » Fri Sep 03, 2010 1:13 pm

rrosenkoetter wrote:
Valuethinker wrote:
FF-Medic wrote:So in my newness there is something that seems obvious to me but I don't see others doing it and I'm not sure why (Maybe it's more of tuning out the noise which is harder than I thought).

It seems to me that right now while things are so low is the time for young investors such as myself to be putting every extra dollar into the market as the only way to go is pretty much up which may take years but hey I've got 30+ years to go. Is there something I'm missing or what?
If this is 1979 then yes.

If this is more like 1968 then no. 12 years of falling behind inflation await.

If this is 1932 then no-- markets rallied, and went straight back down.

Bad stock market cycles can last a decade or more. We could well be in the middle of a 20 year slump.

Note the valuation of stocks is by no measure 'cheap' compared to what stocks were trading at in 1946 or 1979, say.

That said I think negative sentiment is overdone right now.
Anyone in their 20s who went all in in 1932 or 1968 did just fine 30 years later...
Careful. That's true if we are in Australia or the USA. Argentina? Germany? Hungary?
The market may drop again, but if you got 30 years, buying stocks at 10,000 will very likely seem very cheap in 2040... Obviously, it would be better if you could buy in at 6,000, but we may not go back to there, and if you wait, you may end up buying at 14,000 instead..

Who knows?

I would be 90/10 or 80/20 right now if I was in my 20s... and I wouldn't even worry about what the market is doing... You should HOPE we're in the middle of a 20-year slump (very likely, in my mind). That way you can buy around 10,000 for another 10 years...
I think we've got to be realistic about the equity risk premium going forward.

The market knows the 20th century was, for the Anglo-Saxon markets, unbelievably good. That's in the equity price now.

The USA is unlikely to triumph over 2 global enemies again in the next 100 years given there are not really any rival economic models out there at the moment (discounting some truly s-rewed up countries). Similarly the US cannot rise to become the world's largest economy-- again. Nor will it displace the world's (first?) superpower-- ie Great Britain.

3% real is probably your best case, given real return bonds are paying c. 1.5%.

You might get lucky and get 5% say, which would be the top of the historic range.

So yes, it's true, in 30 years you *should* do well. But it's at least statistically possible you will not.

*and* you have to hold your nerve. And not encounter personal needs for cash in the interim: divorce, ill health, school fees, job loss.

As to equity-bond split 100% equities in your 20s is certainly possible and probably you do want a high equity percentage.

However you don't want to bet you will have more money in your 30s than you do now. it's quite possible you will not.

caaaad
Posts: 208
Joined: Wed Jul 22, 2009 1:45 pm

Post by caaaad » Fri Sep 03, 2010 5:46 pm

Not sure if it really isn't different this time. Maybe in 20 plus years people will forget how similiar the stock market looks like the Madoff scheme

maxfax
Posts: 422
Joined: Thu Mar 11, 2010 12:28 pm

Re: Just a quick question

Post by maxfax » Sat Sep 04, 2010 12:27 pm

FF-Medic wrote: right now while things are so low .....the only way to go is pretty much up.

What you are missing is the reality that for every buyer of a stock there is a seller. The buyer thinks prices will rise. The seller thinks prices will fall. Just because you THINK they will rise does not mean they WILL rise. The other guy could be right.

And what makes you think they are 'low'? There are plenty of metrics showing prices to be high.

You decision to work additional overtime is probably a good one regardless. Make hay while the sun shines.

tibbitts
Posts: 7614
Joined: Tue Feb 27, 2007 6:50 pm

Post by tibbitts » Sat Sep 04, 2010 5:03 pm

Anyone in their 20s who went all in in 1932 or 1968 did just fine 30 years later...
Many of those people were killed in wars or otherwise died before they got to benefit from the eventual recovery. You have to figure that into your planning.

I regretted contributing as much to equities as I did during the years when I was earning a much higher income, because in every case, it turned out that my personal earnings were highly correlated with equity market performance.

Paul

FF-Medic
Posts: 61
Joined: Fri May 07, 2010 5:19 pm

Post by FF-Medic » Sun Sep 05, 2010 9:51 am

Thanks all for your posts, additional learning has occurred.

Post Reply