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Thread: Stock market😰

  1. #46
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    Indexing is not monolithic. There are hundreds of index funds. While many are tied to the S&P, many are tied to specific industries such as transportation, growth, blue chip, commodities, utilities, and the like. There is nothing bad or great about index funds. They are all part of a diversified portfolio along with specific stocks and other diversified funds. The key to any stock strategy is to have some growth stock for upside and some very conservative stock (cash, bonds, CDs, blue chips) for downside. Think of a stock portfolio as a football team--you need to play offense and defense.
    Regards,

    Tom

  2. #47
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    Quote Originally Posted by Thomas McCurnin View Post
    Indexing is not monolithic. There are hundreds of index funds. While many are tied to the S&P, many are tied to specific industries such as transportation, growth, blue chip, commodities, utilities, and the like. There is nothing bad or great about index funds.
    That may be, but most employers 401Ks allow their employees a pretty limited access to indexes. In some cases just a few from Vanguard and the like tied into the S&P500. Congress has also changed the defaults for investing such that when companies hire new employees they get signed up automatically for the retirement account, and the 401K is usually pointing at a 60/40 split using an S&P500 index as the stock portion.

    As such we've got more and more money going into stocks that just have two signals: I want money (sell), I have money (buy). There are no other considerations, which means that as this portion grows (which is what's been happening as active management has consistently lost for years) there are fewer and fewer people picking stocks based on anything else. At some point that might become a problem, something even Jack Bogle agreed with.

  3. #48
    I’m in my 60’s and retired. I don’t invest in individual stocks or try to time the market. Made those mistakes years ago. We now hold a mix of index funds that are invested in around 60% stock, 35% bond, and I keep about 5% in cash/money markets. Yes the past few months have been painful, but the market has been giving such strong returns over the past few years, there had to be a correction at some time. I’ll pull only 3 to 4% out a year so the ebb and flow of the market is not as painful as it looks when you are looking at the total amount down from previous peaks. Someone once said index fund investing is like walking up a mountain while doing a yo-yo. It goes up and down but slowly over time it still gets higher and higher. My big regret is not investing more earlier.

  4. #49
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    It's been a rough year this year, our portfolio was down abt 30% at the worst but it's recovered some, but we are still down abt 800,000 since early January. We are retired for 4 years now hope to have enough years left to get all that back and grow it another 50%. Just need to stay the course and ride it out.

  5. #50
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    Rule of Thumb for your 401k is take your age, subtract the age from 100 and that is the percentage of the 401k that should be in stock. So a sixty year old man would have 40% of the 401k in stocks, the rest in quality bonds.

    I'm not understanding how a conservative investment 401k could lose 30% this year. Assuming the investor is 60 years old and has $1mm in the 401k, that would translate to $400,000 in stock. Yeah, the market is down, but not 30% from January. Assuming the investors picks were really bad, and the stock portion is down 30%, that is only 30% of 40%, so the portfolio would be down to about $280,000 and the bond portion would still be at or near $600,000, so the value of the 401k would be $880,000, about a 12% loss year to date.

    The point of this exercise is that a diversified fund is what counts. We used Fidelity at our firm, but I checked with Vanguard and they have at least 100-300 cookie cutter plans for a single asset 401k (its hard to split the 301k into buckets, you have to use a single bucket, hopefully diversified) ranging from aggressive (emerging markets, small cap) to defensive (blue chips + S&P).

    We meet in person with an investment advisor every January and discuss what our portfolio should look like for the following year, because this isn't a Ronco set it and forget it program. This year we tweeked it a little adding commodities petroleum and gold (which have gone crazy up). But since that great portion of our program is only about 10%, it doesn't put us into a wildly positive position, it does make up for some of the S&P losses which the last time I looked was around 15% down year to date.
    Regards,

    Tom

  6. #51
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    Only about 35% of my money is in tax sheltered accounts, the rest is from my investments from the sale of a family business and inherited from my parents if I tried to move 40% of it in to a more conservative account I would be paying taxes on a little over
    1 Million dollars so the 30 percent drop isn't any worse than the taxes that I would be paying, plus the principal is still there to continue to grow. Today with the markets up we gained ~70,00, so we just ride it out. I am a very aggressive investor, heavy in the tech side and have done fairly well I managed to turn 250,000 into 1,000,000 in 6 years. My wife and in are able to live on our Social Security income and the interest and dividends .We meet twice per year with our advisor and they have ran Monty Carlo
    projections for us out to age 95 and the best says we should have an estate of maybe 40mill and the worst is abt 3 mill. So I think we will be ok.

  7. #52
    Quote Originally Posted by Thomas McCurnin View Post
    We meet in person with an investment advisor every January and discuss what our portfolio should look like for the following year, because this isn't a Ronco set it and forget it program. This year we tweeked it a little adding commodities petroleum and gold (which have gone crazy up). But since that great portion of our program is only about 10%, it doesn't put us into a wildly positive position, it does make up for some of the S&P losses which the last time I looked was around 15% down year to date.
    Overall good thoughts and analysis, but you're getting too complicated, here. Unless you have some special knowledge of these sectors, you're just relying on a "gut feeling" that these sectors will do better-than-average, while billion-dollar funds with far more information than you have have already priced their analysis into the market for these. When things go well (like they apparently did for you, here), it's tempting to pat yourself on the back for your investing prowess, but really, you just rolled the dice (and you probably intuitively realize that by only being willing to gamble 10% of the portfolio). Nothing wrong with a small allocation of "play money", though, as long as you realize you're playing.

    People also over-rely on "advisors". If this advisor was any good at picking outsized investments, why would they be meeting with people like you 8 hrs/day? The best "financial advisor" is a therapist who can talk you out of the idea that you know better than others, keep you from making impulsive decisions, and keep reminding you the mantra of: Simpler is better - broad-based, low-fee index fund and forget it.

  8. #53
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    I'm not a big Tony Robbins fan, but his book "Money, Master the Game", should be a prerequisite for anyone who plans to save for retirement. It is a bit dated, but the basic principles he lays out still apply.

    So, regarding bonds, what bonds have actually made money the past two years? I would not consider bonds a safe haven of late.

  9. #54
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    Quote Originally Posted by Thomas McCurnin View Post
    Rule of Thumb for your 401k is take your age, subtract the age from 100 and that is the percentage of the 401k that should be in stock. So a sixty year old man would have 40% of the 401k in stocks, the rest in quality bonds.

    I'm not understanding how a conservative investment 401k could lose 30% this year. Assuming the investor is 60 years old and has $1mm in the 401k, that would translate to $400,000 in stock. Yeah, the market is down, but not 30% from January. Assuming the investors picks were really bad, and the stock portion is down 30%, that is only 30% of 40%, so the portfolio would be down to about $280,000 and the bond portion would still be at or near $600,000, so the value of the 401k would be $880,000, about a 12% loss year to date.
    I don't know if you've been paying attention to recent trends, but a good portion of this year bonds have been hammered along with stocks. TLT (a 20+ treasury ETF) has been down about 20% year to date, depending on the bonds in question you might have more or less losses. S&P500 was also down a similar amount. So generally speaking a minimum of ~20% loss for the entire portfolio, more depending on what else you might have money in. QQQ/Nasdaq has been doing much worse, and that's without venturing into individual picks, some of which have been absolutely hammered.

  10. #55
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    Quote Originally Posted by Andrew More View Post
    I don't know if you've been paying attention to recent trends, but a good portion of this year bonds have been hammered along with stocks. TLT (a 20+ treasury ETF) has been down about 20% year to date, depending on the bonds in question you might have more or less losses. S&P500 was also down a similar amount. So generally speaking a minimum of ~20% loss for the entire portfolio, more depending on what else you might have money in. QQQ/Nasdaq has been doing much worse, and that's without venturing into individual picks, some of which have been absolutely hammered.
    Beat me to it. I always check a bond funds duration value before investing. Mostly hold short term and ultra short term funds but it’s still been painful to watch.
    Last edited by Michael Weber; 07-30-2022 at 12:01 PM.
    My three favorite things are the Oxford comma, irony and missed opportunities

    The problem with humanity is: we have paleolithic emotions; medieval institutions; and God-like technology. Edward O. Wilson

  11. #56
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    Blue Chip Bond Funds yielded me 2% year to date, fairly long term 2 years plus. These are ultra conservative never fail companies. I'm not sure what bonds you are talking about.

    As for not following the advise of an investment professional, I'm not sure how to respond to that without sounding snarky, but here it goes. These guys have 2-3 college degrees in finance, and usually have 10-20 years direct experience in the market. If an investor doesn't want to listen to trained professionals, then you might as well spin wheel of fortune or go to Vegas. These guys listen to me. If I'm in a panic, they calm me down and shift some of of the S&P buckets to bonds or cash. Often if I have a gut feeling, they let play around with $20-50k of the fund to invest in whatever. A couple years ago during extreme political strife, I was very nervous, so was the market, and got them to let me invest in gold. It turned out I made 20%, and while it didn't save my whole portfolio, it certainly made up for other losses. Sometimes gut feelings are good feelings. This year I put the gut feeling fund into petroleum, which is earning nicely. Again, it won't save my account, but is a nice counterbalance.
    Regards,

    Tom

  12. #57
    Quote Originally Posted by Thomas McCurnin View Post
    As for not following the advise of an investment professional, I'm not sure how to respond to that without sounding snarky, but here it goes.
    Sounds like you have access to a good advisor - great. Many less good ones advocate for complex portfolios, charge high fees, and have financial interests that aren't aligned with their clients.

  13. #58
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    All bonds carry a risk of default. The interest the bond pays reflects that risk, high or low. In addition all bonds and bond funds carry interest rate risk. If I purchase a newly issued bond paying 4% and decide to sell it later before maturity, and assuming interest rates have risen to 8% who is going to buy it when they could buy one paying 8%? No one of course. So I have to sell that bond at some level of discount to find a buyer. Thats interest rate risk. It works just the opposite if interest rates fall. My bond is worth more if it’s interest rate is 8% in a 4% market. Bond funds are sold at their Net Asset Value or NAV. The NAV value varies with interest rate changes both up down, like individual bonds, but by an average of the maturities of all the bonds in that fund. This is termed a bond funds duration. The higher the duration the more it’s NAV will change to reflect current market interest rates. Duration is always higher for long term bond funds and less for short term funds. Once again, if a sell of any portion or all of a bond fund is desired or forced due to circumstance, the NAV will reflect current market interest conditions either positive or negative for the seller. The current rapid rise in interest rates has negatively affected the NAV of all bond funds making them less valuable. Ergo, my funds are worth less than last week, month or year and I have technically lost money. Whether this bothers me or other bond investors is dependent on lots of factors but the fact remains the NAV of bond funds rise and fall just as the value of stocks do.
    Last edited by Michael Weber; 08-01-2022 at 6:05 PM.
    My three favorite things are the Oxford comma, irony and missed opportunities

    The problem with humanity is: we have paleolithic emotions; medieval institutions; and God-like technology. Edward O. Wilson

  14. #59
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    Quote Originally Posted by Thomas McCurnin View Post
    Blue Chip Bond Funds yielded me 2% year to date, fairly long term 2 years plus. These are ultra conservative never fail companies. I'm not sure what bonds you are talking about.
    If you don't know which bonds after being given the ticker I think I know how to value your opinion in this area. Thank you.

  15. #60
    Unless things have changed from when I studied finance, the combination of an inflationary AND rising interest rate environment will usually be very bad for bonds. Even if you're holding the bond to maturity where price is not your concern, the payments are being made in inflated dollars at a deflated coupon. This said, bonds can and should be an important part of most portfolios, depending on personal situation.
    Look for intermediate to long term bonds to do well during periods of economic expansion (prosperity) and deflationary periods, especially declining interest rates. A fund like TLT would do well during such conditions.

    An environment like this is challenging for almost all sectors in the financial markets. It just supports the good old advice of being a long term investor so years like this will get averaged out.

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