Stock market optimism

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VINNY
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Stock market optimism

Post by VINNY » Mon Jan 30, 2017 10:31 am

With all the rosy predictions and DOW 20k excitement, does anyone else sense this has the makings of a possible significant downturn. I'm not asking for predictions. I realize nobody knows where the markets are headed and I for one will not act on emotions and stick to my IPS.

I'm just wondering if other people here are feeling or sensing that we might be in a bubble. It seems like everybody is predicting a continued bull run and with all the "positive market forecast" it reminds me of Warren Buffet's quote, "be fearful when others are greedy, and greedy when others are fearful". It just makes me wonder if were in another "bubble".

I just finished reading Andrew Hallam's book, Millionaire Teacher, and I'm wondering if in this bull market the "owners (stocks) need to catch up to the dog (earnings) on the leash running frantically ahead, zig zagging upwards without ryhme or reason"

Thanks for sharing your thoughts.

livesoft
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Re: Stock market optimism

Post by livesoft » Mon Jan 30, 2017 10:32 am

OK, I won't make a prediction, but yes, there are always the makings of a significant downturn in the works … by definition.

And I didn't do any market timing last week when I rebalanced out of equities that hit a trigger limit.

The stock market will probably close today about where it was at the end of last year. That's not what I would call a bubble.
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greg24
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Re: Stock market optimism

Post by greg24 » Mon Jan 30, 2017 10:49 am

We are near historic highs in Shiller PE:

http://www.multpl.com/shiller-pe/

and pretty darn high in S&P 500 PE:

http://www.multpl.com/

But who knows? :confused

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TheTimeLord
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Re: Stock market optimism

Post by TheTimeLord » Mon Jan 30, 2017 10:57 am

greg24 wrote:We are near historic highs in Shiller PE:

http://www.multpl.com/shiller-pe/

and pretty darn high in S&P 500 PE:

http://www.multpl.com/

But who knows? :confused
S&P 500 P/E Ratio Forward Estimate:18.35 for Q4 2017

https://ycharts.com/indicators/sandp_50 ... d_estimate
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Nate79
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Re: Stock market optimism

Post by Nate79 » Mon Jan 30, 2017 11:13 am

When surfing around looking at different news sites I rarely if ever see rosy prediction articles projecting that the market is going to go to even crazier high levels. In fact I see more articles with experts saying we should expect lower growth in the future. On this site there is more pessimism than optimism for the near future. The Dow 20k stories were hot when it was happening but it quickly fell to the way side. I just checked CNN Money and it looks like more negative stories than optimism and the Dow 20k or any related articles seems entirely forgotten.

We can't know the future but I don't see anything like a bubble going on.

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bottlecap
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Re: Stock market optimism

Post by bottlecap » Mon Jan 30, 2017 11:48 am

It doesn't "feel" like a bubble yet to me. You've go to wait until your plumber is taking about all the money he's making in the market.

No offense intended to plumbers.

JT

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willthrill81
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Re: Stock market optimism

Post by willthrill81 » Mon Jan 30, 2017 1:58 pm

Nate79 wrote:When surfing around looking at different news sites I rarely if ever see rosy prediction articles projecting that the market is going to go to even crazier high levels. In fact I see more articles with experts saying we should expect lower growth in the future. On this site there is more pessimism than optimism for the near future. The Dow 20k stories were hot when it was happening but it quickly fell to the way side. I just checked CNN Money and it looks like more negative stories than optimism and the Dow 20k or any related articles seems entirely forgotten.

We can't know the future but I don't see anything like a bubble going on.
+1

I'm not advocating market timing at all, but when an index like the DOW crosses a major threshold, like the recent 20k, it has usually been a signal of new market highs in the near future.

Considering all the people who were scared off in 2008-2009 and didn't experience the current run up since, that's added evidence IMHO that we're not in bubble territory yet.
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MoonOrb
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Re: Stock market optimism

Post by MoonOrb » Mon Jan 30, 2017 2:07 pm

We can at least probably expect a lot of volatility and every time the markets have down days or down weeks we'll all be wondering "is this the beginning of a downturn?" and at some point it will be.

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knpstr
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Re: Stock market optimism

Post by knpstr » Mon Jan 30, 2017 2:08 pm

In general...

I think markets will trend upwards over time.

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TinkerPDX
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Re: Stock market optimism

Post by TinkerPDX » Mon Jan 30, 2017 2:18 pm

I've really only been in the market for a few years. People have been saying the market was overpriced/in a bubble/etc., with a big correction coming, the whole time. Some corrections have happened. But I just keep on buying.

So to answer your question, I suppose, yes, I sense the makings of a significant downturn; but my AA is set with the intention that it will cushion the blow enough that I can maintain discipline and keep investing according to plan, with the knowledge that sticking to one's plan will result in better long-term returns than trying to time the market.

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nisiprius
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Re: Stock market optimism

Post by nisiprius » Mon Jan 30, 2017 2:20 pm

greg24 wrote:We are near historic highs in Shiller PE:

http://www.multpl.com/shiller-pe/
How do you figure that 28 is "near" 44?

I personally see it in terms of some kind of elastic limit. It doesn't mean a thing that the wings of a plane bounce up and down in mild turbulence. Something can bounce up and down a lot and still be safe and well within its breaking strength.
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wolf359
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Re: Stock market optimism

Post by wolf359 » Mon Jan 30, 2017 2:33 pm

I've been feeling we're in a bubble every month since January 2015 (following two great years and a long-running bull market.) And the markets went sideways in 2015 and started falling Jan/Feb 2016 (during Brexit). Then it came back with a strong positive for the year and showed that I was wrong.

I've long discovered that my optimism and pessimism towards the market are in no way actually predictive of their direction. Sometimes my feelings are right. Sometimes they are wrong. I can't tell the difference. My performance is best when I automate my contributions (so I can't vary them) and just rebalance once a year.

But yes, for what it's worth, I think the market has been high based on emotions starting from Trump's surprise election, and will probably drop if the euphoria fades, or the highs are not justified by matching earnings. But clearly, I know nothing.

I've found that if I write down my predictions and revisit how they did, it prevents me from actually acting on them.

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greg24
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Re: Stock market optimism

Post by greg24 » Mon Jan 30, 2017 3:24 pm

nisiprius wrote:How do you figure that 28 is "near" 44?
I guess I misspoke.

Shiller PE was higher in only two periods of history: The Great Depression and the Internet Bubble.

flyingaway
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Re: Stock market optimism

Post by flyingaway » Mon Jan 30, 2017 3:50 pm

Yes, stock prices are high, where do you want to put your money?
Bond prices are high. Inflation is expected to be high in the near future, so cash is also problematic.

kathyauburn
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Re: Stock market optimism

Post by kathyauburn » Mon Jan 30, 2017 3:50 pm

VINNY wrote:With all the rosy predictions and DOW 20k excitement, does anyone else sense this has the makings of a possible significant downturn.
Yes, at best.

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munemaker
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Re: Stock market optimism

Post by munemaker » Mon Jan 30, 2017 3:59 pm

Stock markets go up, stock markets go down. don't try to time the market. Just keep investing and don't worry about the variations. It works out best that way.

I am very optimistic about the economy. It seems shackles are being removed from businesses and industry to make us much more competitive in world markets. Automation continues to improve productivity. Even with an optimistic outlook, I don't change my investment philosophy or asset allocation.

Follow your investment policy statement and ignore the noise.
Last edited by munemaker on Tue Jan 31, 2017 6:45 am, edited 1 time in total.

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oldcomputerguy
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Re: Stock market optimism

Post by oldcomputerguy » Mon Jan 30, 2017 4:01 pm

VINNY wrote:With all the rosy predictions and DOW 20k excitement, does anyone else sense this has the makings of a possible significant downturn. I'm not asking for predictions. I realize nobody knows where the markets are headed and I for one will not act on emotions and stick to my IPS.

I'm just wondering if other people here are feeling or sensing that we might be in a bubble. It seems like everybody is predicting a continued bull run and with all the "positive market forecast" it reminds me of Warren Buffet's quote, "be fearful when others are greedy, and greedy when others are fearful". It just makes me wonder if were in another "bubble".

I just finished reading Andrew Hallam's book, Millionaire Teacher, and I'm wondering if in this bull market the "owners (stocks) need to catch up to the dog (earnings) on the leash running frantically ahead, zig zagging upwards without ryhme or reason"

Thanks for sharing your thoughts.
I don't really know what a bubble feels like. I wasn't paying attention during the tech bubble.
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aristotelian
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Re: Stock market optimism

Post by aristotelian » Mon Jan 30, 2017 4:14 pm

The market is high but it feels more like a slow and steady run that is due for a correction rather than a bubble that is ready to burst. I am worried about student loan debt as a possible bubble but it does not seem to be as bad as housing in the 2000's and people don't speculate on colleges the way they do houses.

BW1985
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Re: Stock market optimism

Post by BW1985 » Mon Jan 30, 2017 4:24 pm

aristotelian wrote:The market is high but it feels more like a slow and steady run that is due for a correction rather than a bubble that is ready to burst. I am worried about student loan debt as a possible bubble but it does not seem to be as bad as housing in the 2000's and people don't speculate on colleges the way they do houses.
They also can't default as easily. You can't just walk away from student loan debt the way you walk away from a mortgage. And if my neighbors don't make their student loan payments it doesn't affect my property values the way it would if there were foreclosures all around me.
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Pranav
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Re: Stock market optimism

Post by Pranav » Mon Jan 30, 2017 5:12 pm

livesoft wrote:OK, I won't make a prediction, but yes, there are always the makings of a significant downturn in the works … by definition.

And I didn't do any market timing last week when I rebalanced out of equities that hit a trigger limit.

The stock market will probably close today about where it was at the end of last year. That's not what I would call a bubble.
I am interested in knowing if there is any rule of thumb for trigger limits.
https://www.bogleheads.org/wiki

livesoft
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Re: Stock market optimism

Post by livesoft » Mon Jan 30, 2017 5:16 pm

Pranav wrote:I am interested in knowing if there is any rule of thumb for trigger limits.
Yes, there are rules of thumb. See bogleheads.org/wiki/Rebalancing

But in this case, Vanguard Portfolio Watch said that my asset allocation was out of whack AGAIN after rebalancing back on 12/16/2016, so I rebalanced again. Here is how PortWatch does that: viewtopic.php?p=3146881#p3146881
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grandmacassie
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Re: Stock market optimism

Post by grandmacassie » Mon Jan 30, 2017 5:20 pm

Isn't the unpredictability of markets the reason we Bogleheads carefully evaluate our risk tolerance and invest accordingly? Why would we change anything?

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blueblock
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Re: Stock market optimism

Post by blueblock » Mon Jan 30, 2017 6:46 pm

The only bubbles I observed today were those in the simmering pot of chicken tortilla soup I made for lunch. :beer

http://cooking.nytimes.com/recipes/1013 ... tilla-soup

Otherwise, I don't have feelings or senses about what the markets may or may not do in the near term. I trained that out of myself years ago. (And I'm no longer being flippant.) If the years since 2008-09 have taught me anything, it's that, with the right asset allocation, one can confidently stay the course and reap the rewards of that dictum. It's a cliché because it's true.

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Re: Stock market optimism

Post by LadyGeek » Mon Jan 30, 2017 7:15 pm

This thread is now in the Investing - Theory, News & General forum (general discussion).

To keep this actionable, how does this affect your investment decisions?
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Re: Stock market optimism

Post by z3r0c00l » Mon Jan 30, 2017 9:14 pm

That graph of the Nasdaq is pretty disturbing, up 330% from the recession low...

But I could just as easily see us get another 1 - 3 years out of this run. If someone offered me a bet I would put $100 on the Dow never falling below 18,000 again. Wouldn't be shocked to see 30,000 before a correction either. That is the key point here, the risk of missing out is more important than any temporary, even years-long drop in stocks. Happy to take the dividends while waiting too.

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k66
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Re: Stock market optimism

Post by k66 » Mon Jan 30, 2017 9:41 pm

When I was a subscriber to the AAII, I used to find their sentiment survey interesting:

http://www.aaii.com/sentimentsurvey/sent_results

For those who are unfamiliar with it, the AAII polls their membership weekly as to where they are personally (bullish, bearing, or neutral). I'm pretty sure it doesn't mean a damn thing, that it is not predictive in any way, but always interesting to see the where the herd is currently.
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columbia
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Re: Stock market optimism

Post by columbia » Mon Jan 30, 2017 9:47 pm

I'm bullish in the long run for a globally diversified portfolio of equities.

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k66
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Re: Stock market optimism

Post by k66 » Mon Jan 30, 2017 9:56 pm

k66 wrote:When I was a subscriber to the AAII, I used to find their sentiment survey interesting:

http://www.aaii.com/sentimentsurvey/sent_results

For those who are unfamiliar with it, the AAII polls their membership weekly as to where they are personally (bullish, bearish, or neutral). I'm pretty sure it doesn't mean a damn thing, that it is not predictive in any way, but always interesting to see the where the herd is currently.
edit to correct a typo
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arcticpineapplecorp.
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Re: Stock market optimism

Post by arcticpineapplecorp. » Mon Jan 30, 2017 9:59 pm

Here's a question for you (don't look ahead): if you knew that there would be the chance of intra year (within each year) losses on average of 14%, would you still want to invest? The chart below shows that since 1980 markets ended each year HIGHER than where they started 28 out of 37 years (76% of the time) even though markets had drawdowns (drops) as big as 14.2% on average. So does it matter if the market drops at some point DURING the year, if the market ends the year HIGHER than it started (more often than not)? What do you think?

source:
https://am.jpmorgan.com/blob-gim/138328 ... lebook.pdf

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slickwillbo
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Re: Stock market optimism

Post by slickwillbo » Mon Jan 30, 2017 11:09 pm

The market feels bubbly to me. But am I making any changes? No. Like most people who make market predictions, I've called 11 of the past 4 recessions correctly.

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Portfolio7
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Re: Stock market optimism

Post by Portfolio7 » Wed Feb 01, 2017 2:09 am

The past few years the market has felt to me like it wants to spring forward, but is still wary (the ghost of 2008 lingers on.) Either way my portfolio will endure.

I think it all depends on earnings. If 1Q is strong, I might win the S&P 500 forecast for the year, but I hope I under-guessed!
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anoop
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Re: Stock market optimism

Post by anoop » Wed Feb 01, 2017 2:55 am

There are a lot of weird things going on with the market.
- Many companies are goosing their earnings by stock buybacks and paying a lower tax rate.
- Many companies are using debt for stock buybacks.
http://wolfstreet.com/2016/12/20/share- ... al-crisis/
- Number of public companies is dropping; amount of consolidation has gone up.
http://finance.yahoo.com/news/jp-startu ... 00709.html

For sure, these are not "normal" times and returns, even according to well respected non-doomer analysts, are expected to be muted. Hey, might as well hear it from Mr. Bogle.
http://www.morningstar.com/cover/videoc ... ?id=772785

Everywhere I look, it appears the average person is not doing well at all. There are a few people at the top that are making out like bandits for sure.

I don't know if this is a bubble, and I don't know how long the game can be played. For sure, if the last 8 years is any indication, the game can be played a lot longer than I can live. :D
Last edited by anoop on Wed Feb 01, 2017 4:27 am, edited 3 times in total.

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stemikger
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Re: Stock market optimism

Post by stemikger » Wed Feb 01, 2017 4:16 am

I've been feeling the same way which is why I slightly changed by AA. I'm 52 and was planning to make this change at 55, but due to feeling the markets are pretty overvalued, I did it now. I changed my 65/35 (stocks/bonds) to 60/40 (stocks/bonds). Will that make much of a difference? Probably not, but it is helping me stay the course. I think every now and then you have to question your risk tolerance and how you feel in frothy markets.
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freyj6
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Re: Stock market optimism

Post by freyj6 » Wed Feb 01, 2017 6:08 am

I think it will be quite a while before we see the mad optimism of the late 90s again. The last two crashes are still too recent in memory and people seem to be cautious about the future.

I think the caution will keep us out of that real "bubble" territory for a bit, but I wouldn't be surprised if we get a bear market in the next 1-3 years.

Then again, I've been consistently surprised by how wrong everyone has been about just about everything over the past few years.

2013: "6 year bull market! Crash coming!"
2014: "US overpriced! High returns for europe and EM!"
Last summer: "Catch the precious metals rally! Dividend stocks!"

selftalk
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Re: Stock market optimism

Post by selftalk » Wed Feb 01, 2017 7:37 am

History shows that the market will be higher in the years to come so today`s highs will turn out to be tomorrows lows. So why fret over if there will be a big drop. If so it will surely pass in time. J. Bogle says "invest we must" as the dollar just depreciates in purchasing power as time goes on. If you have a lump sum maybe you may want to dollar cost average if you are concerned of a drop in prices. Otherwise keep investing.

lostdog
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Re: Stock market optimism

Post by lostdog » Wed Feb 01, 2017 8:03 am

No one knows anything. Just keep saving and follow your IPS goals.

Short term ups and downs but long term growth. Stay the course.
VTWAX and chill.

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Re: Stock market optimism

Post by DartThrower » Wed Feb 01, 2017 11:54 am

Old saying:
The market can remain irrational longer than you can remain solvent.
-attributed to Keynes

New saying:
A Boglehead can stay the course longer than the market can stay irrational.
(because a Boglehead's solvency doesn't depend on what happens in the market)

The market may or may not be rational at this point in time, but it is a comfort knowing that it doesn't matter.
Cheers! :sharebeer
A Boglehead can stay the course longer than the market can stay irrational.

goblue100
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Re: Stock market optimism

Post by goblue100 » Wed Feb 01, 2017 12:07 pm

bottlecap wrote:It doesn't "feel" like a bubble yet to me. You've go to wait until your plumber is taking about all the money he's making in the market.

No offense intended to plumbers.

JT
I agree with this, the bubble and crash terms are tossed around too loosely, IMHO. Yes, the market may be high based on long term indicators, but with so many people wary of it and predicting a down turn, it doesn't feel like a bubble. When everyone gives up on the downside and there are only predication's of blue skies ahead, then you have a bubble. I remember EVERYONE was talking about their 401k's in late 1999, and the stocks they were buying. I don't hear anyone in the halls at this point.

And remember, not every bull ends with a big crash. Sometimes there are just some sideways years, or a couple of lightly negative years. I could see either of those scenarios as being fairly likely the next couple of years.
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sid hartha
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Re: Stock market optimism

Post by sid hartha » Wed Feb 01, 2017 2:37 pm

Are we in a stock market bubble? Probably not but who knows. Doesn't matter. You only ever know these things in hindsight. If you follow the Boglehead way you put in bonds what you can't afford to lose. The rest you can put in a long term, low cost, diversified stock fund or funds if you want international. Over time it will compound and grow. But only if you don't panic and make unforced errors by trying to time the market.

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