What to Do About This Scary Stock Market
I guess Joy Global will never see the old highs again, but even if the coal price stabilises on a fairly low level and they manage to survive this might be a good investment. IT’s all there and I don’t want to write it twice. How do you look at VEF AB since the last investment round of Creditas.
Why would stocks be the only thing in which a buyer completely ignores price ? People used to say this about housing or the Japanese stock market – “it will always make money over a long period of time”. The fact is any investment comes down to expected future cash flows – right now the 10-yr expected return on equities in the US is not fantastic if one uses prior history as a guide. Stocks might certainly continue their climb, but there’s less reason for me to believe so these days.
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I’m going to be a little cautious with stocks and seek other investment opportunities with a ROI around 10-15%. Finding your site has helped me greatly with my savings rate. From the time I graduated up until a few of years ago, I was troubled by all the extra cash left over from my paycheck. I was used to a fairly modest lifestyle during my studying years but after graduation suddenly felt pressure to “update” my life, including wardrobe, food, hobbies, all of the usual crap. Living with a man who was very spendy didn’t help, either. I really wanted to save but didn’t know how.
I was interested and skeptical, and ultimately decided not to use Betterment because it seems like a lot of marketing and not a lot of substance. In general, you never cash out gains as a way of trying to outsmart the market – you just pull money out as you need it. Another great question I should write about in a “How to live off a fixed chunk of money” article.
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Once this happens, the market for that asset tends to swing hard the other way, overshooting fair valuation and going into undervalued territory for some time. It’s also very easy to look up inflation-adjusted prices for all major commodities and see whether or not they are trading at historic lows. If you are buying equities when they are overvalued, you are locking in a lower dividend payout compared to when you purchase at fair prices. In other words, hens may appear overpriced compared to cows, but if the milk prices crash next year, suddenly those “cheap” cows can’t pay the bills.
We put ours in a mix of low risk and equity investments and never looked back. I never said that the P/E ratio is an “infallible” predictor. Just that long-term P/E is representative of how highly stocks are priced compared to their earnings, and that long-term P/E has significant predictive power over likely future returns. And then the stock market resumes its upward march, which it always does.
That makes it quite hard to believe a 4% withdrawal would be possible. 10% down is nothing to write home about but recessions usually let stocks drop by 35% to 55% . Of course, we do not know when such a drawdown strikes but it is fairly certain that we will experience an episode like this in the next 20 years.
So I took that money away and put it in a low cost index fund (that’s right, I currently only own one index fund). Got my investments half north american and half european and still feel comfortable with the way to go. Germany is actually a little better with a 25% tax on investment gains (“Abgeltungssteuer”) when realised – so annualy on dividends but only on payouts for valuation gains. For your investments, you’d still probably want to maintain a worldwide allocation rather than a Europe-only one.
- I’d agree with Matt that leveraged positions are a bit too risky for my blood, personally.
- It’s true that America has consistently performed well, but it has also consistently had a major downturn every 7 to 10 years.
- I applied this same logic to gold and literally made 600% on a $2000 JNUG position, though holding a safer asset such as GDX or GDXJ would have resulted in 100% gains in a couple months.
- When you’re paying 2x-5x the normal price for those things, you’re going to have crappy returns.
You always want to invest with the goal of the highest after tax compound rate of return possible. 10% is nice, but 100% would make you super rich in short order. I think it’s because European style socialism – as great as it might be – makes you passive and that means as a hardcore capitalist you’re the wolf among a country of chickens. There are so many opportunities that people just don’t take advantage of. As a side gig, I’m currently buying houses in the countryside to fix them up to sell them to Dutch people who are looking for affordable houses with more than 10 sqft of lawn around them.
Warren believes in being 100% invested only immediately after a major market downturn. Otherwise, he allocates more money to cash every year. It’s true that America has consistently performed well, but it has also consistently had a major downturn every 7 to 10 years. I think Warren would be fine with a cash hedge right now. Not predicting the apocolypse, just using data to my advantage. So any time I see a financial article even hint at the stuff as a valid investing technique, I know to move on.
There is of course compounding of today’s savings, but it is actually not as clear cut as it seems to be. I’ve read a few articles on this and they are confusing to say the least. Bottom line is the benefits of tax loss harvesting may be somewhat exaggerated. In fact, depending itrader review on tax brackets and such it may be beneficial to do some tax gain harvesting. I live in Finland, which is a great country in many aspects. In short, even though it’s not perfect, society takes pretty good care of us and I don’t need to prepare for the American cost of living.
They need to be watched very closely, which I’m not a fan of, but for someone who both knows and follows the market very well, they can be used with reason and judiciousness. When you take the cyclically adjusted value of the market in aggregate It happens every time. Almost everyone who takes a reasoned, Full Guide on How to Create a Live Streaming Website in 2022 value-based approach was able to do this. Unfortunately, we’re a fairly small portion of the investing public, but we shouldn’t be. While the Efficient Markets hypothesis is definitely correct to some degree, there are limits to it. And at its best, it is only true from the macro perspective.
Plenty of academic evidence and commercial evidence to support this assertion. We DID retire this year (actually Jan. 2015). Our portfolio is now where we projected it to be 5 years from now. BUT we have enough cash to get us through 2017. In the meantime, we are earning MORE from part-time work than we anticipated, and we are spending LESS than we budgeted.
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Timothy says this would be bad if we ended up in a market that looks like the Japanese stock market of the last twenty years. What defines a good stock can take time to learn on your own even with all the great information out there. Even professionals in the space mess this up constantly. Plenty of people have no idea how to analyze stocks including those with accounting or finance degrees. It’s a lot of work that takes time to master and learn.
Regardless of the fact that the market does this, and you shouldn’t be scared by it, you have to also take into account that there is some luck involved in the year you decide to retire. You can do nothing and end up better than people who do something. And have less stress and more money at the end of the day. To complicate the the theory more, arguably, we don’t even really have much of a true “market” in finance in the US.
While you cannot prevent your inevitable decline, you can do a hell of a lot to stop it using simple strength training a few days a week. Be aware the S&P gives you a good exposure to worldwide markets, not just the US. Many of those 500 companies have profits earned oveseas. This is neither good or bad, it just depends on what you want.
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The result was that I was barely able to save enough for a downpayment of an apartment but wasted thousands on unnecessary stuff. I have a medium size stash that I moved into cash about 6 months ago due to fear. I am hoping that the next market route comes soon. I would get back in and probably stay in for the forceable future.
That’s why I moved here, and why I’ll continue to bet everything on it. I think that Pfau and Kitces seem to suggest that if you have lost half of your portfolio in the first decade, you are likely in the small percentage of portfolios that don’t survive 30 years. I keep 5 years living expenses in cash equivalents, just in case. I applied this same logic to gold and literally made 600% on a $2000 JNUG position, though holding a safer asset such as GDX or GDXJ would have resulted in 100% gains in a couple months.
Your social security or other pension will go further. Hi Jerry, you might want to dig into the Betterment article I linked to if you’re into the details. But most people freak out, and there’s a vague sense of tension in the air until she realizes that I’m not one of those people.
They lay eggs called “dividends”, which are real money that can either flow automatically into your checking account, or automatically reinvest itself to buy still more stocks. Some younger companies don’t pay dividends, but that doesn’t mean they aren’t making you money – they are just reinvesting their profits to grow even faster – and eventually become a Super Hen. I know I’m looking at the short term here, but I don’t foresee much growth in the stock market for the next few years. I’m still investing in the market, but I’m keeping a little more cash on the sidelines as well as buying real estate as a hedge to my opinions about the economy the next few years. I’m not even certain taking a snapshot of assets at retirement is a good idea.
And yet, he speaks out against the idea of market “timing” whenever he can. Right now, stocks are priced very high by any reasonable valuation. You might have no need to sell them if you bought fusion markets review them for fair prices and plan on holding them for many years. But one would be foolish, in my opinion, to be a buyer of them right now. The record of history is just too clear to warrant that.
Long time reader and advocate for your brand of lifestyle and philosophy . You admit that you retired in 2011, and the market has gone up a good bit since. That has a huge affect on how much easier it is to handle these down times.