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Thread: Stocks and "the market"

  1. #46
    Quote Originally Posted by Jerome Stanek View Post
    Remember that as of the !st of this new year the Mandatory withdrawal will be 72 years old not 70.5
    I didn't know that. Thanks for posting.

    Mike
    Go into the world and do well. But more importantly, go into the world and do good.

  2. #47
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    Quote Originally Posted by Joe Mioux View Post
    do the exact opposite of any recommendation made by Paul Krugman.

    Kind of hard to predict prices, but you can kind of predict dividends...
    Joe, when was the last time Paul Krugman gave an investment recommendation?

    Mostly he writes about the economics of political agendas.

    Besides, would you rather listen to someone who has received a Nobel Prize in Economics or the guy sitting at the end of the bar?

    jtk
    Last edited by Jim Koepke; 01-14-2020 at 12:13 PM. Reason: Besides, …
    "A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty."
    - Sir Winston Churchill (1874-1965)

  3. #48
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    Quote Originally Posted by Joe Mioux View Post
    do the exact opposite of any recommendation made by Paul Krugman.

    Kind of hard to predict prices, but you can kind of predict dividends...
    Krugman would tell you to invest in low cost stock and bond index funds over the long term, a pretty proven strategy. The opposite would be to buy penny stocks or stocks touted by guys on TV for the latest, greatest, hottest returns 10 times the market (yeah, you bet). Why would I do that?

  4. #49
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    Quote Originally Posted by roger wiegand View Post
    A fun, if old, read on investing is Bernard Malkiel's book "A Random Walk Down Wall Street". There are those who dispute his theory (including Buffett), but his conclusion (basically, invest in a balanced portfolio of low cost mutual funds on a regular basis over time, no matter what the market is doing) works awfully well for most people as a strategy.

    https://en.wikipedia.org/wiki/A_Rand...wn_Wall_Street
    Not sure what you are referring to exactly, but Buffett is the guy who bet $1 million he could beat any hedge funds returns (net of fees) with a basket of index funds over ten years. He has said many times that for a normal investor, index funds are the best option.

  5. #50
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    Quote Originally Posted by Nicholas Lawrence View Post
    Not sure what you are referring to exactly, but Buffett is the guy who bet $1 million he could beat any hedge funds returns (net of fees) with a basket of index funds over ten years. He has said many times that for a normal investor, index funds are the best option.
    Buffet has defended his "value investing" approach, see https://en.wikipedia.org/wiki/The_Su...and-Doddsville. I don't think that's inconsistent with the bet he offered.

  6. #51
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    I'm not familiar with a 457K but for an IRA or a 401K, yes, you have to start taking withdrawals at age 70.5.
    The way it was explained to me, 401K plans do not have a provision for government or public agency employees. The 457K plan is an equivalent of the 401K for them. The 457K may only cover state, county or city agency employees. There may be a similar plan for federal employees.

    Other than having worked for a public transit agency, which had a 457K investment plan available, my knowledge on this is limited.

    One method many of my coworkers employed was to make their contributions high enough so they would max out in October or November. Then the last paychecks of the year would be a few hundred dollars higher. This helps if you have a lot of Christmas shopping to do.

    jtk
    "A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty."
    - Sir Winston Churchill (1874-1965)

  7. #52
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    403-B plans for non-profits are also similar to 401K. I had one for an old employer and Professor Dr. SWMBO's plan is a 403-B.
    --

    The most expensive tool is the one you buy "cheaply" and often...

  8. #53
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    When I started this thread I did not, in any way, mean to discourage people from investing in the stock market. I only meant that listening to prognosticators predict what "the market" would do, in the short term, was not a good way to invest. In fact, if you look at the S&P 500, over the last 35 years, it has returned about 11.3% (assuming reinvesting dividends) in the Vanguard 500 fund. I believe that if you are looking to provide for your retirement ( or any long term need, such as college for your new born child) that investing conservatively in the stock market is a good (but not the only) alternative.
    Note that when I say conservatively I mean investing in a diversified mutual fund (such as the Vanguard 500 fund mentioned above) or ETF, not in Uber or Beyond Meat or the latest marijuana stock
    Dennis

  9. #54
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    Note that the Vanguard 500 is not a diversified fund, it is a large cap, US only, stock fund (mirroring the S&P 500 index). It's a good one, and I own it, but diversification should cover large, medium and small cap markets, US and international, as well as long and short term bonds, real estate, and, if you can find the right vehicle, commodities. It takes a blend of ~6-8 different index finds covering those different sectors to give you a well-diversified portfolio. Companies like Vanguard do also put together low cost target funds that do that for you, altering the blend based on when you plan to retire.

  10. #55
    Quote Originally Posted by roger wiegand View Post
    Note that the Vanguard 500 is not a diversified fund, it is a large cap, US only, stock fund (mirroring the S&P 500 index). It's a good one, and I own it, but diversification should cover large, medium and small cap markets, US and international, as well as long and short term bonds, real estate, and, if you can find the right vehicle, commodities. It takes a blend of ~6-8 different index finds covering those different sectors to give you a well-diversified portfolio. Companies like Vanguard do also put together low cost target funds that do that for you, altering the blend based on when you plan to retire.
    To paraphrase Buffett (Warren not Jimmy) the S&P is dominated by multinationals sufficiently large and diversified that they are _collectively_ almost immune to "local variations in performance" that you would observe in sector investing, hence his claim that that's all you really needed. With sector investing, you tend to fall prey to the issue of "skating where the puck was, not where it will be." Plus it invites paying attention to your portfolio, which nobody is any good at. ;^)

    For absolute diversification, Vanguard also offers Total-US and Total-World, for the obsessed. :^)
    Last edited by Doug Dawson; 01-15-2020 at 9:40 AM.

  11. #56
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    For those not investing in tje stock market, either through individual stocks or mutual funds, whete exactly are you investing? Curious about other options.

  12. #57
    Quote Originally Posted by Pat Barry View Post
    For those not investing in tje stock market, either through individual stocks or mutual funds, whete exactly are you investing? Curious about other options.
    Methinks there aren't really any other options that wouldn't prove themselves to be an illusion in the long term. For example, it's been said about commodities, that there are two kinds of people who invest in them: those that have lost money, and those that will. Ask Louis Rukeyser, who lost so much money in them that he had to go work for PBS and come up with "Wall Street Week". I invite disagreement, of course.

    Then again, there's always the option of never retiring. Many people choose this.

  13. #58
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    Quote Originally Posted by Pat Barry View Post
    For those not investing in tje stock market, either through individual stocks or mutual funds, whete exactly are you investing? Curious about other options.
    Well, there is the bond market. Not nearly as sexy as the stock market, but also (generally) less volatile. A lot depends on your stage in life and your stomach for ups-and-downs in the market. For a young person who doesn't expect to need to draw money from his/her investments in the near term, it's hard to beat the stock market. For an older person, in or near retirement, smaller but more stable returns in the bond market may be attractive. As an example, Dodge & Cox Income Fund (I mention this one because I have some money in it) has a 10-year annualized return of 4.38% and a 15-year annualized return of 4.79%. Not that impressive relative to stocks, but with inflation running at 1-2%, still a positive annual return. And, as we went into the Great Recession in 2008-2009, the fund lost less than 10% of its value, recovering that in less than a year.

  14. #59
    Quote Originally Posted by Gary Ragatz View Post
    Well, there is the bond market. Not nearly as sexy as the stock market, but also (generally) less volatile. A lot depends on your stage in life and your stomach for ups-and-downs in the market. For a young person who doesn't expect to need to draw money from his/her investments in the near term, it's hard to beat the stock market. For an older person, in or near retirement, smaller but more stable returns in the bond market may be attractive. As an example, Dodge & Cox Income Fund (I mention this one because I have some money in it) has a 10-year annualized return of 4.38% and a 15-year annualized return of 4.79%. Not that impressive relative to stocks, but with inflation running at 1-2%, still a positive annual return. And, as we went into the Great Recession in 2008-2009, the fund lost less than 10% of its value, recovering that in less than a year.
    Bonds as a long-term investment have a relatively poor payout, especially now. You'd have to invest 2 or 3 times as much to get a comparable retirement return to what stocks have historically given. However, they are a good stabilizer.

    I'd feel very sorry for anyone who converted to all-bonds back in 2008. ;^/

  15. #60
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    Quote Originally Posted by Gary Ragatz View Post
    Well, there is the bond market. Not nearly as sexy as the stock market, but also (generally) less volatile.
    With all investments it is a good idea to read the prospectus carefully. An investor might be tempted to think that with bonds their only risk is if the borrower defaults.

    However, with a bond fund (as opposed to an individual bond), you also have to take into account the fact that the market value of the bonds drops as interest rates rise. If the fund is not in a position to hold the bonds to maturity, they can lose significant value quickly as they have to sell bonds at reduced prices in order to pay people who want to withdraw their money from the fund.

    A fund I was looking at over the holidays stated in their prospectus that the shares could lose 30% of their value if interest rates went up by 1%.

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