Stock Market

[Shyster]

I wouldn't mind a 10 year lull.
Great buying opportunity..

Demographically speaking, shouldn’t one be coming? The single largest cohort of the U.S. population—the Baby Boomers—is rapidly approaching retirement age, with the oldest fringe of that group hitting 65 already. A lot of those people are going to need to transition their illiquid investments like shares of stock and shares in mutual funds into something more readily convertible to cash (if not cash itself). To do that, they are going to need to sell. The more people are looking to sell something, the lower the price.

[columbia]

I ran across a discussion of that very issue, a few months ago:
http://www.cbsnews.com/news/will-baby-b ... or-stocks/" onclick="window.open(this.href);return false;

[columbia]

I just did some rebalancing and figured out the weighted expense ratio for my IRA: Total Stock Market, Total International Stock Market and Total Bond Market.

.085%

The S&P 500 fund in my 403b is costing me .32%. , but the best available in the plan. If you have a bad 401k at work - and you probably do, because there are plenty of them out there - that will likely run you 1%.

Please don't let your future wealth get dragged down by high cost investing. There's absolutely no need for it.

[KennyTheKangaroo]

This gentleman's SIMPLE plan has a plethora of high cost, low return funds available. Plus with an added bonus of a 4.5% load!! Thanks transamerica!!!!!!

[columbia]

For real? That's ridiculous.

[King Sid the Great 87]

I just did some rebalancing and figured out the weighted expense ratio for my IRA: Total Stock Market, Total International Stock Market and Total Bond Market.

.085%

The S&P 500 fund in my 403b is costing me .32%. , but the best available in the plan. If you have a bad 401k at work - and you probably do, because there are plenty of them out there - that will likely run you 1%.

Please don't let your future wealth get dragged down by high cost investing. There's absolutely no need for it.

Are you factoring in any company matches that are provided from a 401k that are not afforded to someone investing on their own? As a simple example, my wife and I will get about $8500 between the two of us in matching benefits this year (as a function of our salary and contribution). If my expense ratio was 1% (it is a fraction of that but I use it for a simple example), until our combined 401k is at $850K, we would still be netting a positive from the company match that we would not receive outside of the 401k. There are also other things to factor in such as the fact that the money you put in the 401K is tax deferred.

I agree that the cost eats into growth, but when factoring in other variables, the break even point is much different than what you are considering.

[columbia]

I wasn't being clear enough.

I put in enough to my 403b to get the maximum matching amount from my employer. Given the relative cost of my fund through TIAA-CREF, I could certainly add more and not worry too terribly about the expenses. However, I max out my IRA and then anything left over over the course of the year is for taxable accounts.

My general sense is that when people leave a job, they should seriously consider rolling their money out of their 401K and into a Fidelity or Vanguard (which I use) IRA, given the expenses they are *likely* paying.

As I mentioned, we have a matching 403b program. However, we also have a supplemental profit sharing account, which goes into a 401K and is managed by a completely different firm. I received my distribution for that last month and the cheapest option is a large cap fund with an ER of over 1%. It's "free" money, but still.....

It seems like more folks should pressure their 401K advisory committees to offer legitimately cheap investment options. Easier said than done, of course.

[KennyTheKangaroo]

It seems like more folks should pressure their 401K advisory committees to offer legitimately cheap investment options. Easier said than done, of course.

Therein lies the problem. In this gentleman's case, the guy who runs the simple plan is a good guy, friends with kenny the kangaroos boss, and sends the firm a lot of clients.

but the cost is that its a bad deal in terms of retirement.

[columbia]

This seems relevant.....

How to Avoid Getting Ripped Off By Your 401(k) Plan
http://money.usnews.com/money/blogs/the ... 401-k-plan" onclick="window.open(this.href);return false;

[columbia]

Warning: Stocks Will Collapse by 50% in 2014
http://www.moneynews.com/MKTNews/Stock- ... z2xa2cpxFp" onclick="window.open(this.href);return false;

He has access to a secret Wall Street calendar that has beat the overall market by 250% since 1968. This calendar simply lists 19 investments (based on sectors of the market) and 38 dates to buy and sell them, and by doing so, one could turn $1,000 into as much as $300,000 in a 10-year time frame.

“But this calendar is just one part of my investment system,” Hyman adds. “I also have a Crash Alert System that is designed to warn investors before a major correction as well.”

lol?

[KennyTheKangaroo]

You can win the lottery, too, if you just knew what numbers were going to be called.

[Tomas]

You can win the lottery, too, if you just knew what numbers were going to be called.

$1 invested in the period 7/1/1926 through 7/1/2011 grows to, if invested in:

T-bills - buy and hold:
$20.22

US stocks - buy and hold
$2,540.67

T-bills and US stocks - perfect market timing (basically, every month you'd have the ability to forecast if T-bills or stocks will perform better - and invest in that security in that particular month)
$98.71 BILLION

T-bills and US stocks - worst market timing (basically, every month you'd have the ability to forecast if T-bills or stocks will perform worse - and invest in that security in that particular month)
$0.00000005

[columbia]

Beating The Market Has Become Virtually Impossible
http://www.institutionalinvestor.com/Ar ... ingle=true" onclick="window.open(this.href);return false;

[thehockeyguru]

If the market sours, do you think Fed will continue with its plan of less "easing"?

[columbia]

4 things doom-and-gloomers got totally wrong
http://www.marketwatch.com/story/4-thin ... beforebell" onclick="window.open(this.href);return false;

#EPP

[SirMario66]

Hello all.

I'm seeking advice on how to manage my money in the stock market since I'm new at it. I'm 22, graduated college last may, and started working in
October.

I set up a Roth IRA soon after employment and plan on matching the contribution. My portfolio is currently total stock market index, total international, and once I have enough I want to add total bond index and REIT index.

My question is about a general savings account. I want to open up another account with vanguard that I can withdraw at any time. Should I approach my portfolio the same way as I do with my Roth with index funds mostly? I figure I'm saving up for a house or something down the road but I probably won't need the money for a few years. I'm pretty happy with my return on the Roth but I was just wondering if there's a different strategy for general savings. Thank you

Also, I had a question about paying off student loans. I currently have 2 loans: one is $1500 at 5% interest and the other is $16000 with 3%. Everyone says always pay off the one with larger interest but I don't see how that benefits me that much bc I'm only paying 8 or 9 bucks on the $1500 one per month. So most of my payment goes to that one. The $16000 I only do the minimum payment but I'm paying $50 interest every time. Is it worth paying off the larger one to pay less interest in the long run?

Thanks again

[columbia]

Several thoughts:

Congratulations on settling on that portfolio at such an early age in your investing life. You will do great with that combo.

As far as setting up a taxable account with Vanguard, the least conservative advice I've read is to never put any money in the stock market that you plan to use in the next five years. I'm more conservative than that and go with 10, but that's all up to personal preference. For example, next year I will be expanding my LT savings and will be using municipal bond fund with Vanguard, because of the tax advantages that brings:
http://www.bogleheads.org/wiki/Municipal_bonds" onclick="window.open(this.href);return false;

Choosing bonds for that is, well, a personal choice based on my willingness to take risk with that particular slice of my money.

If you want to somewhat mirror your Roth in taxable, that's certainly easy to do. However, if you ever want to rebalance between them to adhere to your target percentages, you'll end up taking a capital gains hit...so it's best to do that through subsequent purchases in whatever account is below its target.

I hope that helps......and the Bogleheads wiki is one of the best resources on the web, as is their message board.

Good luck!

[Tomas]

Hello all.

I'm seeking advice on how to manage my money in the stock market since I'm new at it. I'm 22, graduated college last may, and started working in
October.

I set up a Roth IRA soon after employment and plan on matching the contribution. My portfolio is currently total stock market index, total international, and once I have enough I want to add total bond index and REIT index.

My question is about a general savings account. I want to open up another account with vanguard that I can withdraw at any time. Should I approach my portfolio the same way as I do with my Roth with index funds mostly? I figure I'm saving up for a house or something down the road but I probably won't need the money for a few years. I'm pretty happy with my return on the Roth but I was just wondering if there's a different strategy for general savings. Thank you

Also, I had a question about paying off student loans. I currently have 2 loans: one is $1500 at 5% interest and the other is $16000 with 3%. Everyone says always pay off the one with larger interest but I don't see how that benefits me that much bc I'm only paying 8 or 9 bucks on the $1500 one per month. So most of my payment goes to that one. The $16000 I only do the minimum payment but I'm paying $50 interest every time. Is it worth paying off the larger one to pay less interest in the long run?

Thanks again

First - congratulation. Putting money into retirement at 22 is damn smart, and will make your future life considerably easier.

Second - as much as I hate the long threads, the 30something pages of this one is pure gold. Very little politics, a lot of rational advice for investors.

Third - and this is by no means an investment advice, just a description what I myself have been doing (and would do with even stronger conviction if I were younger than my current 40something): The issue of stocks vs. bonds for retirement portfolios has been discussed numerous times in this thread, even with data. I actually showed here that the worst 30-year annual rate of return for stock investment beats the best 30-year annual rate of return for bond investment. In other words - if I had more than 30-year investment horizon, I would NEVER put bonds into my portfolio (in fact, I still don't have any bonds as of now, and I'll probably wait until my 50s to rebalance). In fact, I would be tempted to slightly overweight riskier stocks (which, once again, I do even now), and so in addition to diversified US stock fund, and diversified international stock fund, I would consider small-cap US and emerging market funds. I don't think real estate needs to be considered. I do put a miniscule number of dollars into this: http://www1.tiaa-cref.org/public/perfor ... /1009.html" onclick="window.open(this.href);return false;. But it's more of a curiosity factor because if you look how the fund evolved over the last 10 years...

Fourth - for my personal portfolio - I am considerably more conservative. The "5-year horizon" that "columbia" poster mentioned above is a pretty good start to think about it. Bonds (both investment and junk) are a sizable portion of my personal portfolio. [In addition to opening Vanguard account, I would actually also open a TD Ameritrade account. TD Ameritrade offers no-fee investment in 101 ETFs. There are some interesting ETFs (junk bonds, international treasuries) that TD Ameritrade has, but VAnguard doesn't.]

Firth - the loan: So, basically you have fixed $X that you hold after paying the interest on both loans. Therefore, the $X will be applied toward the reduction of the principal. Now, do you want to reduce the $X worth of the principal that grows by 5% or by 3%? No brainer IMO.

[SirMario66]

Ok that actually makes a lot of sense. Thank you both very much. I never really understood how the student loan worked but it makes sense just to get the smaller one out of the way anyways, especially since it has a higher rate. i'll definitely have to read through the earlier part of this thread.

[columbia]

Tomas:

What do you think of the idea of using EE Bonds - which are guaranteed to double after 20 years - to create your own laddered annuity, to supplement retirement accounts and SS?
One could buy them from age 40 - 70 and have an additional guaranteed income stream from 70 - 100, as they fully mature (doubling after 20 years + .20%/annum for years 21-30).


I'm not planning on living to be 100.....but I might.

[Tomas]

Tomas:

What do you think of the idea of using EE Bonds - which are guaranteed to double after 20 years - to create your own laddered annuity, to supplement retirement accounts and SS?
One could buy them from age 40 - 70 and have an additional guaranteed income stream from 70 - 100, as they fully mature (doubling after 20 years + .20%/annum for years 21-30).


I'm not planning on living to be 100.....but I might.

I think my sentiment mirrors that of this Forbes article:
http://www.forbes.com/sites/marcprosser ... gs-bond-2/" onclick="window.open(this.href);return false;

Truth is that I don't know much about the tax advantages of these bonds, but the semi-annual interest rates seem to be so low that the only way how you can achieve doubling the investment is indeed to hold the bonds until year 20 in order to obtain the guaranteed interest bump. Now, doubling the investment in 20 years is not that great an investment success (it corresponds to getting 3.52% APY), and so it seems to me you'd be locking yourself to a fairly low rate without the possibility to get out of this investment - all for a relatively low premium over the (risk-free) 20-year Treasury (~3.10-3.20% these days). And, considering that VAnguard retirement specialists still recommend at least some stocks even when you are retired, the 3.52% may even represent a discount compared to the "optimal" portfolio - all while you are unable to move out of those bonds without giving up vast majority of the 3.52% p.a. gains.

[dey soff]

@ SirMario

I second Columbia's suggestion to check out bogleheads. The site has a forum that has a TON of information and questions just like yours. I have learned so much from that site and there are a lot of smart people on that board.

[columbia]

Tomas:

What do you think of the idea of using EE Bonds - which are guaranteed to double after 20 years - to create your own laddered annuity, to supplement retirement accounts and SS?
One could buy them from age 40 - 70 and have an additional guaranteed income stream from 70 - 100, as they fully mature (doubling after 20 years + .20%/annum for years 21-30).


I'm not planning on living to be 100.....but I might.

I think my sentiment mirrors that of this Forbes article:
http://www.forbes.com/sites/marcprosser ... gs-bond-2/" onclick="window.open(this.href);return false;

Truth is that I don't know much about the tax advantages of these bonds, but the semi-annual interest rates seem to be so low that the only way how you can achieve doubling the investment is indeed to hold the bonds until year 20 in order to obtain the guaranteed interest bump. Now, doubling the investment in 20 years is not that great an investment success (it corresponds to getting 3.52% APY), and so it seems to me you'd be locking yourself to a fairly low rate without the possibility to get out of this investment - all for a relatively low premium over the (risk-free) 20-year Treasury (~3.10-3.20% these days). And, considering that VAnguard retirement specialists still recommend at least some stocks even when you are retired, the 3.52% may even represent a discount compared to the "optimal" portfolio - all while you are unable to move out of those bonds without giving up vast majority of the 3.52% p.a. gains.

Oh, it's not an idea without disadvantages and certainly isn't intended as a primary vehicle for storing one's retirement money. The max that one can buy is $10,000 a year. The 3.25% figure is interesting, because I believe that's the current rate of CREF Traditional. I have access to that, but have never put anything into it, because of the withdrawal terms.

[columbia]

For those who like to buy on the dips, the S&P 500 futures is already down 0.8%.

[shafnutz05]

It's been well in excess of six months since I checked this thread. Need to read more often