I just opened a Roth IRA, and am ready to invest in the stock market

[DAA]

I have been watching my returns in my Vanguard 401k and over the last 3 months, each month I lowered the amounts I've had in the slower performing investments and moved those percentages into the higher performing ones.

I just went the other way . But I'm older than you. I feel like I need to start hedging. I might not have time to recover if I get caught too deep in the next bear market.

I'm just a dollar cost averaging, index fund buying, Graham believer, Dalio asset allocation emulating drone. I try hard not to apply any imagination whatsoever to my retirement investments.

I rebalance by the calendar, every six months.

And I embrace the fact that I absolutely can not predict the future and have no idea what is going to happen.

But, longest bull market in history. Best year I've ever had in returns and real dollars (my overall portfolio earned 28.8% in 2019). I decided it was time to take a big chunk of my winnings off the table and hedge. So I dumped 60% of my four highest earning funds (mid caps and global tech funds, they each did over 30% in 2019) and moved that all to bonds. Took my over all allocation from 75/25 common stocks/bonds to 50/50.

I'm not totally comfortable with it. If interest rates go up, my bond holdings aren't going to fare so well. They won't take a real beating, the coupon rate offers protection against that, but they could lose a little bit if rates go up. I don't know if there has ever been a strong bull market without inflation and super low rates like we have right now. It's like the stocks/bonds counter cycle is broken. So it doesn't feel like anywhere is safe.

So, I really agonized over it.

When the bear market does come though, rates will very likely go down and in that situation, my bonds will do well.

I've also reversed my contribution allocations to now go 25/75 stocks to bonds. You're supposed to buy low and sell high. It's all about getting stocks at the right price. You aren't supposed to buy just because a stock is going up and you aren't supposed to sell just because they are going down. Just the opposite. They are selling for record highs right now. So, I sold a bunch at the highest price they have ever sold. And have all but stopped buying. I'll start buying again the next time there is a big drop. Whenever that is, six months, a year, two years, three years. Whenever it happens I'll start to buy again and push a big chunk of the principle I just protected back in. I think I'm mostly done buying in this bull market though, the price is just too high. Q4 was just too nutty. I don't know the future, but that shit just can't be sustainable.

But I think it's a solidly conservative move. I'm not attempting to time the market. I'm just trying to protect some big wins, and hedge against a heavy downside if the market turns without too severely limiting upside. I'll hold pat for at least 18 months - until after the election.

But, I have a limited window. I need to be thinking about protecting wins. I want to retire in 10 years. All I need is to maintain my current contribution level and a steady 8% from here to reach my goal of a six figure retirement income. If I was younger, I'd be much more risk tolerant. But I can imagine myself holding 75% bonds and only 25% stocks five years from now.

- DAA

 

[Noahfecks]

Just a personal theory, take it for what you will

I would be weary of the US treasury bond market, it seems stable at the moment. I smell an Oct election surprise facilitated by the Chinese and their Washington allies attempting to oust the president. In the last 18 months China has printed an alarming amount of money and used most of it to purchase US treasury's. My theory is that they will initiate a bulk sale with the intention of flooding the market, the rest of the world won't be able to absorb the flood, and T-bills will become a non-liquid asset unless you want to take a bloodbath. Of course you should be OK if your intention is to hold the position to maturity, taking the coupon rate and believing in the credit worthiness of the federal .gov to pay all of it's unfunded long term obligations. Just beware, diversify into corporate and local municipal (tax advantages) bond markets, don't put too many eggs into the t-bill basket.

I work as a corporate lending officer, and if you came to me with the finances of the US Gov and asked me for money I would openly laugh in your face. I have very little confidence in the federal governments ability to pay it's debts without printing money in a hyper-inflationary market, think Wiemar Republic. We have been circling the bowl for a while now, as we spiral down the circle tightens and velocity towards the inevitable increases exponentially.

Yeah, yeah. Gloom and doom. Tinfoil hats. Just be cautious, there are several red flags

 

[DAA]

My bond holdings are as diversified as I can make them. I'm not a trader and I don't pick securities. I'm a no load, low cost index fund, minimal decisions guy. Every decision I make is a chance to let emotion play a role or to think I can predict the future. So I try and avoid putting myself in that position. Nothing fancy.

What scares me, is I don't trust the US or the bond markets either. Cash would be a terrible investment. No place feels safe right now. But the market feels the least safe to me. A fourth quarter with earnings returns over 10% set off all kinds of alarm bells in my tiny brain.

- DAA

 

[TurboMinivan]

Besides retirement investing, I did open up a Robin Hood account in order to try out some short term investing and play around with the stock market.

I would urge you to be extremely cautious, assuming you don't re-think this entire strategy all together. There is an ever-growing number of suckers investors who decided to use Robin Hood and begin day trading like a pro (because it's so easy, doncha know) only to lose tens of thousands of dollars because of poor decisions coupled with the inability to see into the future. Slow and steady wins this race.

I'm just a dollar cost averaging, index fund buying, Graham believer, Dalio asset allocation emulating drone.

Which is not a bad thing to be, at all... especially if you carefully choose index funds which beat the market.

And I embrace the fact that I absolutely can not predict the future and have no idea what is going to happen.

I am often reminded of a classic quote. In an interview, somebody asked Warren Buffet what the stock market would do in the future. His response? "It will fluctuate."

So, I sold a bunch at the highest price they have ever sold. And have all but stopped buying. I'll start buying again the next time there is a big drop. Whenever that is, six months, a year, two years, three years. Whenever it happens I'll start to buy again and push a big chunk of the principle I just protected back in. I think I'm mostly done buying in this bull market though, the price is just too high. Q4 was just too nutty. I don't know the future, but that shit just can't be sustainable.

But I think it's a solidly conservative move. I'm not attempting to time the market.

Irony: saying "I'm not trying to time the market" immediately after explaining how you're trying to time the market.

I certainly understand wanting to move some of your earnings into more stable areas if you are very near retirement. However, the portion which you've earmarked for the market would produce better results if you put it to work now. Over and over and over, history has shown this to be the way to maximize your return. Something to think about.


In other news--and perhaps ironically since I didn't check into RME today until just now--this morning I transferred my first $1000 of this year's contribution into my Roth account, and then bought shares of three more stocks with it.

 

[DAA]

The market will fluctuate . I'm prepared to wait years for the next big drop, if need be. And I'll be reacting to what has already happened. Not trying to time what I hope is going to happen.

I just sold at record highs. To start buying back again right away at even higher prices would be stupid.

- DAA

 

[DAA]

Might add... if the bear market never comes, awesome! I'll make less in my current allocation but if the bull market lasts five more years I'll still make enough my goal number will be in the bag.

If it does come I'll still lose but I'll lose a lot less and be able to buy low and hopefully recover in time.

I'm not betting on anything. I'm just being conservative. If the market stays strong I still win. If it doesn't I'll be more protected and lose much less.

- DAA

 

[comingdown]

And all this is why I prefer real estate. I get my match at work in my 401k but real estate seems to be much more stable then the stock market if it is done wisely. My dad has never invested anything in the stock market that I’m aware of, and he brings in well over 6 figures retired collecting rents from his rentals. Not a bad way to spend retirement, it keeps him busy when he turns them over so he doesn’t get bored and makes enough to comfortably do what he wants. Not a bad gig.

 

[Noahfecks]

Real Estate can be a great strategy but it takes some timing just like the stock market. The buy low sell high adage is still the secret to success.

Imagine buying an 4 plex in spring of 2008 at the top of the RE market and having to lower the rents below your monthly nut in 2009. People lost big time.

I have several clients in the RE game and there are lots good things if you hit it right

 

[comingdown]

My grandpa said the only time you loose money on real estate or investments is when you buy it and when you sell it. He never sold a property he bought. And he invested heavily in bonds and mutual funds his whole adult life. I mean he had bearer bonds from WWII in his possession he bought during the war when he passed away in 2010. He kept everything. He accumulated houses and got lucky with inflation in the 70s and became just extremely wealthy almost overnight.

The biggest thing I try to tell my co-workers who are younger and have a shot at being successful is to invest now, get the clock running and start putting money to work for them. I try to explain opportunity costs of their choices they make now could really effect their future. Sadly they don’t listen but I still try. I guess I’m an old soul trapped in a 34 year old body.

But I understand about the property. I haven’t bought anything lately because I want to see what happens. My sister just paid a lot of money for a duplex which will be a hard pill to swallow for a few years but I’m sure she’ll make out okay in 20 years. If the world lasts that long.

 

[Noahfecks]

opportunity costs

Spoken like a true economist

 

[TurboMinivan]

I just happened upon this quote today, and it made me think of this thread:

"Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” -- Peter Lynch

Best of luck to everyone who has participated in this thread. May we all achieve our financial goals in life.

 

[Homefryy]

The biggest thing I try to tell my co-workers who are younger and have a shot at being successful is to invest now, get the clock running and start putting money to work for them. I try to explain opportunity costs of their choices they make now could really effect their future. Sadly they don’t listen but I still try. I guess I’m an old soul trapped in a 34 year old body.

I am so thankful for the jobs that my wife and I have. My job does profit sharing every year that ends up putting an amount equal to around 10% of my salary into my 401k and my wife works for the U where they automatically put an amount equal to 14% of her salary into her retirement account. At 31 we aren't going to be rich in retirement but we are on track to be able to maintain our lifestyle when we retire.

5 years ago we were not thinking about retirement and wouldn't have started putting as much money away as we should but since our jobs do it automatically we are in a good place.

Given our age we are 100% invested in the lowest fee index funds available in our plans. Not sure when we need to start moving some money into bonds but we have 30 years to ride out whatever may happen to the market.

My goal now is to start investing money that I can access before retirement. I don't want to put all our money in retirement accounts and then die before we get to use it. I want to reap the rewards of investments at 45 not 65.

Currently all my extra money goes into my XJ and I don't think I'm going to get any of that back.

 

[jeeper]

Imagine buying an 4 plex in spring of 2008 at the top of the RE market and having to lower the rents below your monthly nut in 2009. People lost big time.

Most of my properties were bought just prior to '08. One was in Nov '08.. and I thought the value had dropped out enough to buy it.. I was wrong. That particular house lots about $40,000 more. (now it's up about $150,000)

However.. my mortgage payments never changed.. and rents didn't go down at all during the housing crisis. At least not any where I saw.
People freaked out because they were upside down, and thought foreclosure was better than owing extra money. Made no sense to me.

 

[Cody]

I was able to slowly get more for rent during the housing crisis... I assume because the market was flooded with renters losing homes.

 

[Greg]

So, the stock market, eh? How is everyone doing?

I'm scared to check my 401k with each passing day. I realize things will recover eventually, but this is hard to watch. I haven't lost 10% yet, but I'm approaching that number.

 

[anderson750]

I took a glance the other day and it was down about a 2013 Rubicon

 

[Tonkaman]

This ought to provoke some anxiety

 

[mesha]

I have enough time that I am not worried. I feel terrible for everyone that is close to retirement.

I will up my contributions to take advantage of the dip.

 

[Spork]

Easy to panic look at the 1 year average and. It's not as scary.

 

[Greg]

Easy to panic look at the 1 year average and. It's not as scary.

Totally agree, give it a month or 2 and I *think* everything will bounce back.

I'm curious how much of this is just companies being scared of the coronavirous, but not ACTUALLY effected... and how many business are actually effected, in terms of parts supply, manufacturing, etc. I know that with my drop shipping business, I can still order product directly from China and the companies are getting low priority products out the door. I think it's being blown out of proportion, personally.