OT - Dow plunges 1,175 - worst point decline in history

[verticaldoug]

Originally Posted by steveandbarb1

Our adviser said upside 10%, downside 20-30%. Take my chances mostly on the sidelines

That's fine, the advisor is bearish, but you are probably not on the sidelines. The advisor probably has you heavily in bonds. What is their view on bonds- Munis, Investment Grade and High Yield?

You may be on the sidelines for equities, but you aren't on the sidelines.

[C40_guy]

Originally Posted by likebikes

man, active investing and buying individual stocks is so weird to me.

It takes a good amount of time and effort, so it's not for everyone (or perhaps even most people). Most people are best served by buying three mutual funds or ETFs, and rebalancing quarterly or annually:

Total Stock Market fund
International Fund
Bond fund

A good amount has been written about this approach. Here's an article from Forbes (as an example).

For people that want to "play" a bit in the market, one approach is to put 80% of your money into this three fund/ETF portfolio, and use the rest for buying individual stocks. That way you get the consistency of the portfolio investing strategy plus just a bit of thrill/terror.

[seanile]

Originally Posted by C40_guy

It takes a good amount of time and effort, so it's not for everyone (or perhaps even most people). Most people are best served by buying three mutual funds or ETFs, and rebalancing quarterly or annually:

Total Stock Market fund
International Fund
Bond fund

A good amount has been written about this approach. Here's an article from Forbes (as an example).

For people that want to "play" a bit in the market, one approach is to put 80% of your money into this three fund/ETF portfolio, and use the rest for buying individual stocks. That way you get the consistency of the portfolio investing strategy plus just a bit of thrill/terror.

this is my favorite piece of short/informative reading material to recommend re: passive investing: https://www.dropbox.com/home?preview...ent+Saving.pdf (If You Can by William Bernstein, he wrote it for his son)

[NYCfixie]

Originally Posted by fkelly

Let's not forget the basic principles of asset allocation, passive investing, and not trying to time the market.

Yes, it makes perfect sense that cloud computing companies will do well in the near to medium term future. For instance. But that's already been built in to their stock price. That's what Wall Street analysts and big investment firms do all day, every day. Joe Schmoe individual investor is not going to out-think them on a consistent basis.

Yeah, maybe Covid will keep ravaging us and economy for a year or more. Or maybe one of the genetic science based vaccine companies will come up with a risk free way to vaccinate us against Covid and all similar viruses in the next six months and the economy will take off again. We don't know; we can't know.

Just allocate your assets based on your needs ... use inexpensive index funds and don't try to outsmart the market.

That's gold, Jerry! Gold. (but please do not invest in it because it is currently overpriced and overvalued)

I have been reading comments in this thread from time to time and while I am sure someone else has said it before, the above is still really good advice. I do not mean to oversimplify things but IMHO there are 3 types of individual investors:

1) Try to beat the market
2) Try to time the market
3) Long term investors


1) Based on what I know from my own financial education (self-taught), the individual investor will never have the same information as those in the industry and thus will always be playing information catch up. A a result, it is almost impossible to beat the market unless that person gives up their day job and spends all their time researching and analyzing the businesses that make up individual stocks they want to purchase/own. Even then, you can't assume they will make the right choices (and you can't assume the professionals will either). High frequency trading and day traders also work against the individual investor.

2) This is a fools errand and most often the individual investor misses the true low and the true highs because they do not know when to buy or sell (see 1 above). This person over the long term does not beat the market because they cannot optimize buying and selling.

3) History has proven time and time again that people who are in it for the long term will match and often beat market returns by not chasing trends or market highs and lows. Unfortunately, most people do not have the stomach for it, especially the lows.

This strategy does not work for most as my wife and I are only invested (all taxable and retirement accounts) in broad based index (not active) mutual funds. When people were panic selling all the way down to the bottom from 2006-2009, we were buying as much as we could afford. We probably lost at least 40% of our overall "on paper" net worth in those three years but we never sold anything. By not trying to time the market like others, we made it all back and a great deal more because we were buying "low" on the way down and enjoyed all of the upswing by never selling.

We have invested together for more than 20 years and individually longer than that. Before we were married, my wife was invested in similar broad based mutual funds and I was invested in DRIP accounts which were often blue chip stocks (now all sold and money invested in index funds).

Ours is a very simple and boring strategy that needs little maintenance and yields market (and often above market) returns. As a result, more of our time and money can be spent on fun pursuits rather than agonizing about market returns or analyzing individual stocks. One does need the stomach to ride out the lows and not sell which is usually where this strategy fails for most.

Time and patience is always on our side.

[alancw3]

I think stock markets have another leg down before getting better. I could easily see the dow at 20,000 and the s&p at 2200. it will be interesting to see what happens when all these companies start announcing dividend cuts. I could see Xon at 30, pnc at 75 and spy at 250 or less.

[veloduffer]

Originally Posted by C40_guy

It takes a good amount of time and effort, so it's not for everyone (or perhaps even most people). Most people are best served by buying three mutual funds or ETFs, and rebalancing quarterly or annually:

Total Stock Market fund
International Fund
Bond fund

A good amount has been written about this approach. Here's an article from Forbes (as an example).

For people that want to "play" a bit in the market, one approach is to put 80% of your money into this three fund/ETF portfolio, and use the rest for buying individual stocks. That way you get the consistency of the portfolio investing strategy plus just a bit of thrill/terror.

I would also recommend a stable value or money market fund for holding your emergency "rainy day" funds. Minimum amount would be 6 months of living expenses, which would cover mortgage, etc but more importantly deductibles on your healthcare and home insurance.

If you are already retired, the account is important so you don't have to sell assets in down cycles (realize a loss) at times when you need cash.

[C40_guy]

Originally Posted by veloduffer

I would also recommend a stable value or money market fund for holding your emergency "rainy day" funds. Minimum amount would be 6 months of living expenses, which would cover mortgage, etc but more importantly deductibles on your healthcare and home insurance.

If you are already retired, the account is important so you don't have to sell assets in down cycles (realize a loss) at times when you need cash.

Yes, agreed. This would be separate from the investment approach discussed above...and 12 months would be a better target than 6.

So...people say "there's no way I can save 6 months of emergency funds."

Agreed...if you *need* to have 6 or 12 months of emergency funds in place, kinda by definition, it's going to be hard for you to do so. Start small...put $50 or $100 away each week or each month, automatically, into a separate account. You'd be surprised at how quickly it adds up.

The key is to *start*.

[echappist]

Originally Posted by seanile

this is my favorite piece of short/informative reading material to recommend re: passive investing: https://www.dropbox.com/home?preview...ent+Saving.pdf (If You Can by William Bernstein, he wrote it for his son)

Hear, hear

Originally Posted by C40_guy

Yes, agreed. This would be separate from the investment approach discussed above...and 12 months would be a better target than 6.

So...people say "there's no way I can save 6 months of emergency funds."

Agreed...if you *need* to have 6 or 12 months of emergency funds in place, kinda by definition, it's going to be hard for you to do so. Start small...put $50 or $100 away each week or each month, automatically, into a separate account. You'd be surprised at how quickly it adds up.

The key is to *start*.

The key is always the start.

Unfortunately, this forum, similar to many other forums based on hobbies, encourages discretionary spending at the expense of what's financially prudent.

Just because something is difficult doesn't mean it isn't worth doing

On the flip side, this is also not meant to trivialize the difficulties faced by those taking first steps in saving up for a nest egg and/or rainy day fund.

[KarlC]

Originally Posted by C40_guy

It takes a good amount of time and effort, so it's not for everyone (or perhaps even most people). Most people are best served by buying three mutual funds or ETFs, and rebalancing quarterly or annually:

Total Stock Market fund
International Fund
Bond fund

A good amount has been written about this approach. Here's an article from Forbes (as an example).

For people that want to "play" a bit in the market, one approach is to put 80% of your money into this three fund/ETF portfolio, and use the rest for buying individual stocks. That way you get the consistency of the portfolio investing strategy plus just a bit of thrill/terror.

Originally Posted by seanile

this is my favorite piece of short/informative reading material to recommend re: passive investing: https://www.dropbox.com/home?preview...ent+Saving.pdf (If You Can by William Bernstein, he wrote it for his son)

Originally Posted by NYCfixie

That's gold, Jerry! Gold. (but please do not invest in it because it is currently overpriced and overvalued)

I have been reading comments in this thread from time to time and while I am sure someone else has said it before, the above is still really good advice. I do not mean to oversimplify things but IMHO there are 3 types of individual investors:

1) Try to beat the market
2) Try to time the market
3) Long term investors


1) Based on what I know from my own financial education (self-taught), the individual investor will never have the same information as those in the industry and thus will always be playing information catch up. A a result, it is almost impossible to beat the market unless that person gives up their day job and spends all their time researching and analyzing the businesses that make up individual stocks they want to purchase/own. Even then, you can't assume they will make the right choices (and you can't assume the professionals will either). High frequency trading and day traders also work against the individual investor.

2) This is a fools errand and most often the individual investor misses the true low and the true highs because they do not know when to buy or sell (see 1 above). This person over the long term does not beat the market because they cannot optimize buying and selling.

3) History has proven time and time again that people who are in it for the long term will match and often beat market returns by not chasing trends or market highs and lows. Unfortunately, most people do not have the stomach for it, especially the lows.

This strategy does not work for most as my wife and I are only invested (all taxable and retirement accounts) in broad based index (not active) mutual funds. When people were panic selling all the way down to the bottom from 2006-2009, we were buying as much as we could afford. We probably lost at least 40% of our overall "on paper" net worth in those three years but we never sold anything. By not trying to time the market like others, we made it all back and a great deal more because we were buying "low" on the way down and enjoyed all of the upswing by never selling.

We have invested together for more than 20 years and individually longer than that. Before we were married, my wife was invested in similar broad based mutual funds and I was invested in DRIP accounts which were often blue chip stocks (now all sold and money invested in index funds).

Ours is a very simple and boring strategy that needs little maintenance and yields market (and often above market) returns. As a result, more of our time and money can be spent on fun pursuits rather than agonizing about market returns or analyzing individual stocks. One does need the stomach to ride out the lows and not sell which is usually where this strategy fails for most.

Time and patience is always on our side.

Good points guys

[C40_guy]

Originally Posted by KarlC

Good info guys

You're welcome. Directly from the School of Hard Knocks.

Here's another suggestion...as soon as your kids have earned income -- baby sitting, lawn mowing, website development -- set up a Roth IRA for them, and get them accustomed to putting 20% of that money aside.

I had this conversation with my son when he was 15. He was working and wanted to save for/buy a car. So we went through his budget, and I flagged 20% for retirement.

He asked why. So i asked him to fire up another spreadsheet and do a quick set of "what-ifs" if he started saving at 15. At 40, given our assumptions, he would have $1M (current dollars).

He thought that was cool...he thought it was even cooler that this money, at the age of 40, is officially referred to as "F$ck You money".

And now, 15 years later, he is well on his way. Slow and steady...

[tuscanyswe]

Originally Posted by C40_guy

You're welcome. Directly from the School of Hard Knocks.

Here's another suggestion...as soon as your kids have earned income -- baby sitting, lawn mowing, website development -- set up a Roth IRA for them, and get them accustomed to putting 20% of that money aside.

I had this conversation with my son when he was 15. He was working and wanted to save for/buy a car. So we went through his budget, and I flagged 20% for retirement.

He asked why. So i asked him to fire up another spreadsheet and do a quick set of "what-ifs" if he started saving at 15. At 40, given our assumptions, he would have $1M (current dollars).

He thought that was cool...he thought it was even cooler that this money, at the age of 40, is officially referred to as "F$ck You money".

And now, 15 years later, he is well on his way. Slow and steady...

I wish someone had that conversation with me when i was 15. Or maybe someone did and i just wasent paying attention..

[C40_guy]

Originally Posted by tuscanyswe

I wish someone had that conversation with me when i was 15. Or maybe someone did and i just wasent paying attention..

Dude. Me too.

[echappist]

Originally Posted by tuscanyswe

I wish someone had that conversation with me when i was 15. Or maybe someone did and i just wasent paying attention..

Not to get overly political, but it's less urgent for you

You live in a country with a strong safety net. Sure, perhaps you could save more of your post-tax income, but a lot of that saving has been done for you, in terms of contributions to the national safety net.

The U.S. has comparatively lower taxes; more of whatever that doesn't get taxed ought to be stashed away, b/c we don't have much to fall back on.

But this is also the land of keeping-up-with-the-Joneses, one predicated upon consumerism (to quote Oscar Wilde, the nation that went from barbarism to decadence without having civilization in between). Add to that the notion any type of "personal freedom" is an unalloyed good and general disregard for "rules", few pays attention to wisdom derived from experience. End result being, despite the fact that few has a defined-benefit pension, retirement account for those 60-69 has an average balance of ~$200k (the median balance is lower at $62k).

Again, not to exculpate the various forces responsible for the massive number of low paying jobs without much benefits, but this is also a country not known for personal responsibility.

C40 is fortunate, that his son buys into wisdom distilled from experience (though more likely is that this is by education, and not luck); by the same token, his son is fortunate to have parents who could impart such wisdom.

[NYCfixie]

Originally Posted by echappist

... this is also the land of keeping-up-with-the-Joneses, one predicated upon consumerism...

And the reason that my wife and I are invested in these specific sector funds:
Consumer Staples
Consumer Discretionary

This might be a small bump in the road but these funds have done exceptionally well and will continue to do well once people can get back out and spend money.

[Ozz]

Originally Posted by tuscanyswe

I wish someone had that conversation with me when i was 15. Or maybe someone did and i just wasent paying attention..

A woman I worked with had it with me when I was 25....a little late but it really stuck.

Had it with our son last year as he graduated from HS.....gave him a little $$ to get him started.