Investment account back up!

[RSKY]

With the stock market going down the last few months I have a sister who was in a panic mode. They had received a statement for their account in the mail and had lost a little more than 10%. She was ready to fire her advisor and take all her money out. My other sister and I convinced her not to do this. Mine also dropped not quite 10% but I had a lot in CDs so it didn't hurt as bad. The market started going back up and the sister was pacified a little but still thought she should have pulled everything out. Now this week mine has topped where it was the highest it has ever been and is slowly creeping up. I expect the panicking sister's to be way up her next statement. She only checks hers monthly when the statements arrive.

I am trying to make a point here. When you have money invested in stocks or mutual funds, and the market drops, don't panic and sell for a loss. It will come back up! Well, it will if it is a mutual fund. Single issue stocks may not if the company goes bankrupt or something. (Why I don't invest in individual stocks) A person needs to buy mutual funds when everybody is talking doom and gloom and everybody worried about what is going to happen. Only sell when the market is good and prices are up.

Over the years I have seen people on this forum say they cashed their 401Ks because the market had dropped and it was worthless. Not realizing that if they held it a few months or years longer the value would go up dramatically. This is a basic misunderstanding of the markets and how they work. (don't want to get banned for calling people stupid)

Anyway, hoping your investments in your retirement accounts have recovered.

RSKY

 

[ruffdog]

Some people are slow to react so they end up selling at a loss. I had a friend like that. He would be panicking as the stock was dropping and finally start talking of selling. I would tell him if it drops a bit more I'm going to buy more. People end up thinking a stock will ALWAYS go up and they ride it all the way down. Like they say..."never fall in love with your stock".

 

[Torvy]

Most people have no idea how investments work. If they did, they wouldn't put much, if any, money in things like CDs or savings accounts.

I had a lot of fun and satisfaction teaching kids (most of whom came from poor households) how simple, small investments held over a long period would make them millions by age 65.

Mutual funds are certainly part of a sound portfolio. Also, stocks that regularly pay divideds and REITs.

 

[ruffdog]

At least with a CD you know what the return will be, with no surprises from a market loss.

 

[MoKelly]

I’m not a fan of mutual funds - primarily for tax reasons. You cannot control the amount or timing of distributions which are taxable unless inside a ROTH (or similar account).

So, I typically own the stock or bond itself so I can control the timing and amount of any taxable event.

Taxes are, by far, my largest annual expense so I tend to try to manage as best as possible.

I particularly like MUNI bonds with no Federal or State income taxes.

 

[Torvy]

At least with a CD you know what the return will be, with no surprises from a market loss.

CDs are almost always a loss. Here's some unbiased info.

CDs vs. Inflation: Are They Keeping Up?

Learn how to determine whether the money invested in certificates of deposit (CDs) can keep pace with the rate of inflation and how you measure inflation.

www.investopedia.com

 

[ruffdog]

CDs are almost always a loss. Here's some unbiased info.

CDs vs. Inflation: Are They Keeping Up?

Learn how to determine whether the money invested in certificates of deposit (CDs) can keep pace with the rate of inflation and how you measure inflation.

www.investopedia.com

You look at investing as a form of income. Maybe your job doesn't pay too good and you have more bills to pay so you invest because you NEED income. I have already made my money and I don't NEED any more. A CD just offers a way of having a bit more return on what I do have. There is a big difference in those two positions.

 

[MossRoad]

With the stock market going down the last few months I have a sister who was in a panic mode. They had received a statement for their account in the mail and had lost a little more than 10%. She was ready to fire her advisor and take all her money out. My other sister and I convinced her not to do this. Mine also dropped not quite 10% but I had a lot in CDs so it didn't hurt as bad. The market started going back up and the sister was pacified a little but still thought she should have pulled everything out. Now this week mine has topped where it was the highest it has ever been and is slowly creeping up. I expect the panicking sister's to be way up her next statement. She only checks hers monthly when the statements arrive.

I am trying to make a point here. When you have money invested in stocks or mutual funds, and the market drops, don't panic and sell for a loss. It will come back up! Well, it will if it is a mutual fund. Single issue stocks may not if the company goes bankrupt or something. (Why I don't invest in individual stocks) A person needs to buy mutual funds when everybody is talking doom and gloom and everybody worried about what is going to happen. Only sell when the market is good and prices are up.

Over the years I have seen people on this forum say they cashed their 401Ks because the market had dropped and it was worthless. Not realizing that if they held it a few months or years longer the value would go up dramatically. This is a basic misunderstanding of the markets and how they work. (don't want to get banned for calling people stupid)

Anyway, hoping your investments in your retirement accounts have recovered.

RSKY

There's a caveat to staying the course, and that's if you're going to need your money before the market comes back up. You may have to cash some out at a loss if you need it.

Back in 2008, when I was 47 years old, and the market tanked, and our net worth dropped by 30%, we stayed the course. By 2010 we were back to even, and by 2012, our net worth doubled from pre 2008 levels. Fantastic! A 100% gain in 4 years. Pretty good.

Fast forward to today. I'll be 63 soon. While our net worth growth was not effected too badly in the last few years, and it didn't grow as much as I'd have liked it to, we're at the point where we might want to lock in our nest egg, not wanting to risk another large downturn, not knowing how long a recovery could take.

 

[CloverKnollFarms]

We are up 25-28% YTD across all funds. I'd like 40% considering the past 24 months of burning things down. However, this is a long game... And our 15 year average is 10%. I carefully select funds and revise them when needed. The wife is about to go off and earn another $60k per year for us, which is why I'm pretty sure I'm retiring soon. I’m not that smart, but I can do simple math, so we always had savings goals.

 

[dstig1]

There's a caveat to staying the course, and that's if you're going to need your money before the market comes back up. You may have to cash some out at a loss if you need it.

Back in 2008, when I was 47 years old, and the market tanked, and our net worth dropped by 30%, we stayed the course. By 2010 we were back to even, and by 2012, our net worth doubled from pre 2008 levels. Fantastic! A 100% gain in 4 years. Pretty good.

Fast forward to today. I'll be 63 soon. While our net worth growth was not effected too badly in the last few years, and it didn't grow as much as I'd have liked it to, we're at the point where we might want to lock in our nest egg, not wanting to risk another large downturn, not knowing how long a recovery could take.

Sound practice says that you should move a portion into cash-like investments around now (since you are close/thinking about retiring soon) while things are up. I've heard 2-3 yrs worth of needs should be in cash.

But you also will need to live off that money for the remainder of your life which could be 20-30+ years, so pulling it all out into cash would assure you losing purchasing power due to inflation over that time. Even if the nutz in Washington pull their heads out and get it back under control. It adds up significantly over time as it is the same compounding interest that helps you in your 401k over the years, but in reverse.

The worst thing that can happen is to retire directly into a down market as you now have to withdraw money when everything is down, so you lose twice as you take losses up front and now that money is not invested for the rebound over the long haul. But if you have cash reserve set aside, you can mitigate the loss. Down markets always happen over time, but when that happens relative to your retirement is a much bigger and more personal issue. Later in retirement it is not so big an issue as it is early on.

 

[Torvy]

You look at investing as a form of income. Maybe your job doesn't pay too good and you have more bills to pay so you invest because you NEED income. I have already made my money and I don't NEED any more. A CD just offers a way of having a bit more return on what I do have. There is a big difference in those two positions.

Wrong again. I'm retired. Investments are absolutely a form of income. I don't "need" it except to counter the inflationary pressure.

A CD is just losing money more slowly than keeping cash in your mattress. It is like saying a piece of gauze on a serious bleed is sufficient, when you really need stitches. It's your money, but stop lying to yourself and anyone who reads this that thinks a CD is providing real income.

 

[CliffordK]

One can always follow the very wise investment strategy of "Buy High, Sell Low". It is so very easy to do.

It is so very hard to tell when one is at a peak, or if the market is going to continue to drop. However, I need to pay more attention to the next time there is talk about inflation. These interest rate hikes drove much of the market plunge, so perhaps it was predictable, at least for the better investors.

At the same time, I don't want to realize the capital gains just to save a few percent plunge, so a different strategy would also be of a benefit. Selling options?

 

[Lineman North Florida]

One can always follow the very wise investment strategy of "Buy High, Sell Low". It is so very easy to do.

It is so very hard to tell when one is at a peak, or if the market is going to continue to drop. However, I need to pay more attention to the next time there is talk about inflation. These interest rate hikes drove much of the market plunge, so perhaps it was predictable, at least for the better investors.

At the same time, I don't want to realize the capital gains just to save a few percent plunge, so a different strategy would also be of a benefit. Selling options?

Didn't you mean buy low , sell high?

 

[MoKelly]

One can always follow the very wise investment strategy of "Buy High, Sell Low". It is so very easy to do.

It is so very hard to tell when one is at a peak, or if the market is going to continue to drop. However, I need to pay more attention to the next time there is talk about inflation. These interest rate hikes drove much of the market plunge, so perhaps it was predictable, at least for the better investors.

At the same time, I don't want to realize the capital gains just to save a few percent plunge, so a different strategy would also be of a benefit. Selling options?

One of the smartest guys I used to work with said when you trade stocks you need to make 2 good decisions:

- the right time to sell

- the right new thing to buy

It’s not east to get both correct.

That is why few have outperform the indexes over a sustained period of time.

 

[CloverKnollFarms]

Buying and selling, and long term holds, are separate animals. The vast majority of people have no business buying and selling, timing the market, short of folks in Congress.
Finding good long term holds is much easier, it removes emotion. It’s not exciting. It’s not glamorous. Half of my net worth is owed to it though… And I interact with it very infrequently.

 

[LD1]

You have to invest without emotion.

When things drop, everyones first reaction is to panic and pull money out.....and when the stock market is doing exceedingly well, everyone wants their piece of the pie and wants to invest. However that is exactly the opposite of what you really should do.

You need to put money in when things have tanked, and pull it out when its doing well. Buy low, sell high. But that is difficult to do if you are an emotional investor.

And relying on paper statements in the mail puts you behind the curve. in your case....she panicked but it was for nothing because things had already recovered. Had she been monitoring it.....when it tanked would have been a good time to put more money in.....and she would have had that nice little 10% jump that things have saw over the last 2-3 weeks.

While my 401k money is like 99% mutual funds....like target retirement date funds, large cap growth funds, international, etc etc. Bout 10 different "funds"....In my personal accounts that I buy/sell/trade in I dont like mutual funds. Because everything is diluted.

Sure, mutual funds are safer, because a few of the holdings within that fund doesnt do well....as long as the majority are doing well you see growth. But the reverse is true.....if a few do exceedingly well....like 20-25% gains in a year.....they are watered down by the rest of the holdings. In that case it would be better to just own the few that do really well.

But thats the gamble with the market, picking which ones were gonna do really well. So its alot more risky. Mutual funds will never be able to have the growth potential of individual stocks.....but they will also never have the risk potential for great losses.

Basically, the average person dont make a good investor. They look at a statement once a month, or look at a couple of stocks a few times a year and bet with emotion. IF you really want to get into investing and managing your own money....you literally have to monitor it daily. There have been stocks on my radar for 6-months before I pulled the trigger.

Selling and making money is the easy part if a stock went up. Hard to hit the timing perfect....but making money is making money. IF I buy a stock for $10, and sell it for $15.....only to watch it climb on to $17 before dropping back down to $12.....I missed a few bucks. Or watching it hit $17....thinking i will sell when it hits $18....but it starts falling and I still get out at $15. Still profit....but the HARDEST part....and requires patients.....is what to do with that $15 after it is sold. Cause in general, if the stock market is up....its up across the board. And selling stocks when they are high.....I dont want to turn around and re-invest but just a different stock that is equally high. Be patient, sit with that money available and ready to pounce if something on your radar falls below your trigger point

 

[duffer]

The value on your statements only reflects a snapshot at a very specific time. (close of the market on the last trading day of the month). If you only look at your accts via the statements once a month, or once a quarter, and you're a "nervous Nelly" to begin with, you might want to reconsider your risk tolerance.

If you manage your risk appropriately, your returns will take care of themselves.

 

[CloverKnollFarms]

The value on your statements only reflects a snapshot at a very specific time. (close of the market on the last trading day of the month). If you only look at your accts via the statements once a month, or once a quarter, and you're a "nervous Nelly" to begin with, you might want to reconsider your risk tolerance.

If you manage your risk appropriately, your returns will take care of themselves.

I feel no need to look at statements often… why? The only thing that matters is the average, and each statement is a snapshot. I agree. I think folks who look often, are probably not meant to be long term investors. I can see I’m up almost 30% this year, but what matters to me is my portfolio over time, like the past 15 years. The more active a trader is, typically the lower their returns. More tax implications, and nobody can time the market.

 

[RSKY]

I am retired. We live off pensions and my Social Security checks. And we do not lead an extravagant lifestyle. So the money I have invested is not what we live on. It is what we consider generational wealth to be passed on to our children and our grands. So I am looking at the long run. Both daughters and their husbands have 401Ks they contribute to. Oldest and husband both have state pensions. Youngest and her husband have large employer contributions to their 401Ks. All five of my grands have an investment account with Fidelity that they know nothing about and will know nothing about until we pass or they turn 21. Those five funds are invested in a mutual fund that has been the top earner over the last 10, 5, and 1 year period. It averages over 20% growth a year.

What I am trying to say is that my needs are taken care of until I no longer need the money. Then the accounts I have set up will help my children to do the same thing I have done. Which is to set it up so their children can have a little bit of fall-back financial security. Just as our parents left us land they paid off and we sold.

We will pull some money out next year to purchase a new vehicle. But everything else is set up so we can leave our investments to sit and grow.

RSKY

 

[MoKelly]

I am retired. We live off pensions and my Social Security checks. And we do not lead an extravagant lifestyle. So the money I have invested is not what we live on. It is what we consider generational wealth to be passed on to our children and our grands. So I am looking at the long run. Both daughters and their husbands have 401Ks they contribute to. Oldest and husband both have state pensions. Youngest and her husband have large employer contributions to their 401Ks. All five of my grands have an investment account with Fidelity that they know nothing about and will know nothing about until we pass or they turn 21. Those five funds are invested in a mutual fund that has been the top earner over the last 10, 5, and 1 year period. It averages over 20% growth a year.

What I am trying to say is that my needs are taken care of until I no longer need the money. Then the accounts I have set up will help my children to do the same thing I have done. Which is to set it up so their children can have a little bit of fall-back financial security. Just as our parents left us land they paid off and we sold.

We will pull some money out next year to purchase a new vehicle. But everything else is set up so we can leave our investments to sit and grow.

RSKY

Excellent!!

My Dad passed a year ago. He had accumulated an estate and had a will. But, we still had to go through the courts to settle. Took right about a year. Needed a lawyer. Slowest process I’ve ever seen.

Do you have a Trust to avoid probate?