Stocks and "the market"

[Jim Koepke]

Jim,
Good job if you bought gold at $10/ounce and have held it. Even if it were 30 years ago, at today's spot rate, your return has been over 18% annually compounded. Not too many people could beat that.

Just as a comparison, the average home in the US has appreciated at about a rate of 1% per year over the long term. Most people don't realize how poor an investment a personal home is. Shelter yes, an investment, not so much.

Edwin

On housing, it is all about location, location, location. In some areas a person would have a difficult time giving away property. In other places one might get tired of 'investors' knocking on their door every day wanting to buy their home.

I'm pretty sure Jim's not old enough to have bought gold at $10/ounce. I'm thinking it's the silver he got at $10.

Well as has been pointed out from time to time, we do have some old dawgs around here, but I think you're right on this one.

Edwin

Yes, my faux pas not stating it was silver. Even the founding fathers had gold pegged above $10 an ounce.

Some of my silver was pulled from circulation at face value. Shortly after the Hunt brothers tried to corner the silver market one could purchase common silver dollars from many coin dealers for less than $10. Some of the 'regular customers' would come in and purchase a few then make the rounds of some bars, slap one down on the counter and ask, "anyone here buy me a beer and give me $20 for this silver dollar?" Tough job, but someone's gonna do it.

jtk

[Nicholas Lawrence]

You have to have shelter. The only choice you get to make is how much, and whether you rent it (0% return on investment) or buy (some return on investment). All else being equal, something beats nothing every time.

[Jim Koepke]

You have to have shelter. The only choice you get to make is how much, and whether you rent it (0% return on investment) or buy (some return on investment). All else being equal, something beats nothing every time.

Besides, if one rents the owner can raise the rent, sell to someone who wants to move in or any other myriad of untoward actions.

Buying with a fixed mortgage at least lets you plan month to month expenses without a big surprise or having to move.

Our old home in California was purchased by my parents in ~1946. To the best of my knowledge it cost less than $9000. It was transferred to me in the late 1980s at $110,000. We sold it a few years ago for double that. If we had wanted to put in a bunch of work via long distance we could have likely tripled from the price at transfer. We were happy to be out of the long distance real estate business. It was a bit serendipitous that a broker called wanting to know about my M-I-L's house. She had died recently. He ended up conveying our old home instead. It was a very easy transaction with almost all of it taking place over the internet and telephone. No regrets.

jtk

[Tim Otto]

Market gains are still "paper gains" since they are denominated in USD, a fiat currency since 1971. Until the fiat is exchanged for something useful and real, like a new (old) planer, tools, firearms, etc., even gold and silver (as a store of value), you still have nothing but a string of 1's and 0's in cyberspace.

Buy low, sell high, collect early, pay late ... works every time.

[Thomas L Carpenter]

And then along came the dreaded RMDs. Everyone has to pay the piper (taxes) eventually. I've always kept my investments simple but after both of us having several different employers over the years we have investments at various locations and you REALLY have to pay attention to doing your RMDs correctly. DAMHIK.

[Ron Citerone]

And then along came the dreaded RMDs. Everyone has to pay the piper (taxes) eventually. I've always kept my investments simple but after both of us having several different employers over the years we have investments at various locations and you REALLY have to pay attention to doing your RMDs correctly. DAMHIK.

I thought once you retired you could roll them all into one IRA and simplify/consolidate the RMD stuff?

[Thomas L Carpenter]

I thought once you retired you could roll them all into one IRA and simplify/consolidate the RMD stuff?

You definitely can and one day I will. All my eggs in one basket comes to mind but I guess these days that a pretty old fashioned mind set.

[Jim Becker]

I thought once you retired you could roll them all into one IRA and simplify/consolidate the RMD stuff?

Yes, you can consolidate with no penalties and simplify things. That was only one reason I rolled over my 401K to IRAs. The second was that a portion of the 401K was eligible to be directly rolled into a Roth IRA (the portion that was post-tax deposits into the 401K because it was over the annual limit for pre-tax) which means that money and it's earnings will be able to be withdrawn federal income tax free after the 5 year waiting period. (Although I would withdraw that last because of the tax advantages including to my estate, as it were)

Required Minimum Withdrawals hit at age 70 for tax deferred accounts like 401K and tax-deferred IRAs, and if one doesn't "need" the money, those withdrawals can be re-deposited into a Roth, assuming one's income level permits depositing into a Roth.

[Gary Ragatz]

Required Minimum Withdrawals hit at age 70 for tax deferred accounts like 401K and tax-deferred IRAs, and if one doesn't "need" the money, those withdrawals can be re-deposited into a Roth, assuming one's income level permits depositing into a Roth.

If you aren't already required to take RMD's, the rules changed this year, pushing RMD's back to the year you turn 72.

[Jim Becker]

If you aren't already required to take RMD's, the rules changed this year, pushing RMD's back to the year you turn 72.

Thanks for that update. I'm only 63 next month so I'm not worrying about RMDs for awhile... ...and even what I take now is above what I believe would be the RMD, I suspect.

[Ronald Blue]

I'm not going to get into the stock market analysis. It's to much smoke and mirrors. For example, let's say you had a portfolio worth $100,000 and the market dives 25%. 75,000 now correct? So let's say this was in 2008. Just for discussion sake. They say they average 10% a year gain. However in 2007 you were worth 100,000 and now your worth $75,000. Their 10% claim is misleading because you will need about 4 years to get back to where you were. It really lowers the actual performance of your portfolio. "Figures don't lie but liars figure". Just food for thought.

There are better investments believe me. Look up life settlements. Also real estate investment companies. Private equity funds. There are some others but I won't put them out there here. Some of these require you to be accredited. So out of reach for some. They are around but you have to search for them and research them.

[Art Mann]

If you think real estate investments are less risky than stocks, you need to do a little more research yourself. The same is true of private investment funds.

[Jim Koepke]

One thing to consider in almost any investment is if there is no risk, there is likely not much of a reward or very little interest to be paid.

Nothing is a perfectly safe bet. Successful investors diversify. Said another way, do not put all of your eggs in one basket.

Realestate can cause the headaches of being a landlord and property maintenance on one side. Bare property can eat one up in taxes while waiting for it to appreciate.

Commodities fluctuate or contracts expire. Even if you bought silver in the 1960s look at what a dollar would buy then compared to now. A person couldn't actually buy large amounts of gold in the U.S. until the 1970s without buying coins for collecting at a premium. Gold and silver may be a good hedge against inflation.

Stocks and bonds have always fluctuated. At least with bonds there is the promise of the full value at maturity with interest payments along the way.

jtk

[Edwin Santos]

Gold and silver may be a good hedge against inflation.

jtk

Inflation? What's that?

Seriously though, inflation is a bit of a chameleon. On the one hand it has been a long long time since we've seen meaningful inflation as reported in the CPI figures. Like since the early 80s. On the other hand, we've seen so much asset price escalation for things like real property, higher ticket durable goods like vehicles. But for everyday items and disposable consumer goods, many things are not really any more expensive than they were decades ago. I think this is in large part due to the diffuse benefits of global trade and low cost manufacturing in places like China. And then tech items and electronics have actually deflated in price, significantly. To your point though, future purchasing power of your money is an important thing to be aware of.

Like I commented earlier, it is unfortunate that so many people who have not been in a position to invest or benefit from asset appreciation in some other way have been left behind due to their wealth either stagnating, or moving backwards in relative "real" terms.

Interestingly even though we haven't had a lot of "official" inflation, gold has been a very good speculative investment since 2000.
However timing is everything. If you bought gold in 1980, you would still be waiting to break even.
On the other hand, if you had invested $10,000 in Microsoft in 1989 and either forgot about it or had the discipline to not touch it, today you would have over $2.5M, a return of almost 25,000%. And the best part is after writing the initial check to buy it in 1989, you would never have to write another check again. A real estate investment will usually involve writing checks perpetually until the day you sell it, and even then the selling costs will usually be about 5-7% of the total sale price. The selling cost of the Microsoft stock would be about $10 in exchange costs at a no trade fee broker like Schwab.

[Ole Anderson]

Anybody here bold enough to get into the market as it bottomed out in 2008, not knowing if it was going to totally crash?